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Mining and geology for Idiots

This document provides an overview and introduction to a book titled "Mining & Geology for Idiots" which aims to simplify complex geological, mining, and financial concepts for non-experts. It explains that South Africa has some of the richest mineral deposits in the world, which it dominates in platinum, gold, and manganese. The book is divided into seven parts covering the geology, resources, mining methods, processing, evaluation, and financial analysis of South Africa's major deposits. It seeks to impart knowledge of the earth's processes and promote the scientific study of geology in an accessible way.

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Equity|SouthAfrica|Mining Mining & geology for idiots (like accountants, actuaries, BA and BCom graduates, politicians, bankers, fund managers and DMR employees) . 5th Edition | 2011
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 2
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 3 Author René Hochreiter BSc mining geology (honours) BSc mining engineering MSc Geology Fellow of the Geological Society of South Africa Member of the South African Institute of Stockbrokers Why did I write this book? All of us live in a two-dimensional world on the surface of the earth. Yet beneath the surface of the land and sea there is another world of mineral riches, molten lava, colliding continents, faults, new growing minerals, thrusts and many more processes that have given rise to what we see in our two-dimensional world today. I, as a geologist, am always aware of why we see what we see. I want to impart that knowledge to the layman and propagate the study of the earth and its processes in a way that is easily understood and benefits the science of geology for the many. The assistance of in producing this booklet is gratefully acknowledged.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 4 Contents Part I: Overview................................................................................................................. 5 Overview............................................................................................................................ 5 Introduction................................................................................................................... 6 Glossary of terms.......................................................................................................... 8 Part II: Geology and genesis of SA’s main economic orebodies................................ 14 Metals and minerals exploited in South Africa............................................................. 15 The Witwatersrand system.......................................................................................... 22 The Bushveld Complex (BC)....................................................................................... 25 The Karoo system....................................................................................................... 28 The Transvaal system................................................................................................. 31 The Waterberg system................................................................................................ 32 Greenstone belts......................................................................................................... 33 Granite basement ....................................................................................................... 38 Diamonds.................................................................................................................... 40 Part III: Mineral resources and reserves ....................................................................... 44 A short (and sad) case study of why resources are important..................................... 45 Interpretation of borehole drill results.......................................................................... 47 Part IV: Mining methods and exploitation..................................................................... 52 Mining methods .......................................................................................................... 53 Part V: Metallurgical recovery and refining .................................................................. 72 Metallurgical recovery circuits ..................................................................................... 73 Refining ...................................................................................................................... 73 Part VI: The evaluation process for investment divisions........................................... 88 Exploration studies and sampling (including drilling)................................................... 89 Orebody evaluation..................................................................................................... 90 Feasibility study and investment decision ................................................................... 92 Our contribution – cash flow analysis, the final step.................................................... 92 Part VII: Financial analysis of orebodies ...................................................................... 95 Mining the stock exchanges of the world .................................................................... 96 Net present value calculation...................................................................................... 96 Conclusion.................................................................................................................. 98 Acknowledgements..................................................................................................... 99
edbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 5 Part I: Over view Overview
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 6 Introduction This simple reference book is published to assist fund managers and inexperienced investors in understanding the general geology, resource statements, mining methods, metallurgical circuits and cash flow statements used by South African mining companies and, as such, used to value their shares. A request by a fund manager with no mining background, who will remain anonymous, generated this work of art and of necessity. A request for numerous copies of this book, from the world’s largest mining company, which will also remain anonymous to save it embarrassment (!), has been a real eye-opener. The reference book is kept as brief and simple as possible, and consists of seven parts: Part I Overview Part II Geology and genesis of South Africa’s main economic orebodies Part III Mineral resources and reserves Part IV Mining methods and exploitation Part V Metallurgical recovery and refining Part VI The evaluation process for investment decisions Part VII Financial analysis of orebodies During your cover-to-cover read, you will come across topics such as the fakawee mining method which is used mostly to mine fubarites, made famous by South African mine managers (see glossary). This mining method, although not described in detail, runs like a golden thread through the different aspects of this book. We hope you enjoy scanning it. For some background, the earth was formed 4.6 billion years ago. Most mineral resources mined in South Africa were formed in the age range of 2.7 billion (for the Wits gold deposits) to 85 million (Kimberley diamond deposits) years ago. South Africa has some of the richest ore deposits in the world. It dominates global platinum, gold and manganese resources and is right up there with many other metal and mineral resources. The last 70 years have seen exploitation of these resources through a variety of mining methods not generally understood by the layman nor the generalist fund manager, accountant or lawyer who always seem to be involved in a mining venture. This book describes the geology, the genesis, and the mining and processing of these ore deposits as simply as possible. The following text is with deference to Prof M Hrebar of the Colorado School of Mines: “Why do we do it? All this nonsense of digging, drilling, sweating and milling. All for a little bit of something shiny and sparkly. The expense. The sweat. The planning. The headaches and heartaches. It takes billions of rands, even dollars and about 7-8 years from the initial surveys to get a mine into full operation.”
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 7 Is the geologist right? Is he a one-handed or two-handed geologist? Will the market back us? Will we get a permit from the central or local government authorities? Will it pass the black empowerment bandwagon test? Are there any environmental problems? Can we get at it? Can we get power/water/people and machines there or do we have to build our own power station, pump our own water from miles away, build our own town, road, railway, airport? Why do it? What a headache! If you are producing gold at, say, $700/oz and churning out 1 million ounces a year from your mine, and if you happen to own a few of these little babies … that’s a lot of money at the current ~$1,300/oz gold price! The cash from one mine pays for the next operation, the reclamation of the old project, and for all those lovely little dwarves, digging, drilling, sweating and milling away… hi-ho-hi-ho, it’s off to work we go. “Looking – finding – testing – evaluating – building – mining – processing – cleaning” … no wonder there are few left in the industry with nerves not shot through. No wonder the capacity for bull-gnittihs (see Digital Fortress by Dan Brown for code) naïve fund managers and accountants and lawyers and the layman is unending. So to get a slightly better handle of the most important components of a mine/mineral project… read on.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 8 Glossary of terms General terms Carat A carat is a unit of mass equal to 200mg, used for measuring gemstones and pearls cm/g.t Centimetre grams per tonne DMR Department of Mineral Resources (DMR) g/t Grams per tonne (32.151g = 1 ounce) Geology terms Au Chemical symbol for gold Craton Large stable block of undisturbed ‘plate’ of rock millions of years old Cu Chemical symbol for copper Dip The steepest part of a dipping or slanting plane Dolerite Same as granite, but formed when lava erupts and cools on earth Dyke A vertically/sub-vertically intrusive body of magma Fm Formation Genesis Creation Granite Formed when magma cools in earth Greenstone Very old rocks, the first rocks to be formed after the earth cooled Heavy mineral sands Titanium, rutile and ilmenite Igneous rocks Rocks formed deep inside the earth from magma or on surface from lava Magma Lava inside the earth Lava Magma after it has erupted from the earth Metamorphic rocks Pre-existing rocks (ie sedimentary, metamorphic and igneous) deformed by pressure and temperature My Million years Ni Chemical symbol for nickel Pd Chemical symbol for palladium Pegmatite Rock which melted and squeezed its way into pre-existing solid rocks PGMs Platinum group metals (platinum, palladium, rhodium, gold, iridium, ruthenium) Pt Chemical symbol for platinum Qte Quartzite Sb Chemical symbol for antimony Sedimentary rocks Rocks formed by the erosion of other rocks and deposition of this eroded rock in water or on land Strike The horizontal line on a slanting plane Supergroup A sequence of rocks defined by geologists to have been formed together Zn Chemical symbol for zinc Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 9 Mining terms A fatal Death in a mine Adit A horizontal tunnel entering a mine from the side of a hill Aykona No Aziko sper Finger lost through LTI (below) Cage The ‘lift’ in the shaft used for hoisting men and material CIP Carbon in pulp; carbon in a pulp solution attracts gold to the carbon Cross-cut A tunnel from the haulage to raise/winze (below) Developing (development) Blasting an excavation horizontally underground; also referred to as ‘boor-en- blaas’, a miner’s sole purpose no matter if it’s on-reef or not Fakawee Confused. Generally used in the context of ‘where the fak-ah-wee’ mining method Fubarites The name for a rock (fubar) that has been ‘fu**** up beyond all recognition’ Haulage A tunnel from shaft to cross-cut Haulage truck Large tippler truck (biggest now 500-tonne load) used to haul rock Hoisting Moving men, material and rock up and down a shaft Jou gat Your hole Jou moer You are wrong! Ledging The first ‘cut’ of reef on either side of a raise which begins the stoping process LHD Load-haul-dump vehicle LTI Lost-time injury Milling Grinding rock to powder Mining Breaking rock On-reef Where the miners are supposed to ‘boor en blaas’ as opposed to ‘off-reef”, where there is no value Raise Upwards-inclined tunnel on reef Ramp Inclined, helical tunnel used to gain depth using rubber-tyre equipment Reef The rock that contains the minerals Reef An orebody containing gold/platinum, usually thin and tabular Refining Removing the valuable part of the broken and ground-up rock Seam ‘Reef’ but used when talking about coal Shaft A vertical or inclined tunnel used for transporting men, materials and rock; the top of the shaft can be on surface or deep underground Shaft sinking Blasting an excavation vertically downwards, usually to 2,000m (or the weight of the rope becomes too great) Skip The ‘elevator’ used in the shaft to hoist rock Stoping The act of mining in a confined space Waste Any rock not containing value Winze Downwards-inclined tunnel on reef Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 10 Periodic table of elements Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 11 Alphabetical list of elements Ac Actinium Ge Germanium Pr Praseodymium Ag Silver H Hydrogen Pt Platinum Al Aluminium He Helium Pu Plutonium Am Americium Hf Hafnium Ra Radium Ar Argon Hg Mercury Rb Rubidium As Arsenic Ho Holmium Re Rhenium At Astatine I Iodine Rf Rutherfordium Au Gold In Indium Rh Rhodium B Boron Ir Iridium Rn Radon Ba Barium K Potassium Ru Ruthenium Be Beryllium Kr Krypton S Sulphur Bi Bismuth La Lanthanum Sb Antimony Bk Berkelium Li Lithium Sc Scandium Br Bromine Lr Lawrencium Se Selenium C Carbon Lu Lutetium Si Silicon Ca Calcium Md Mendelevium Sm Samarium Cd Cadmium Mg Magnesium Sn Tin Ce Cerium Mn Manganese Sr Strontium Cf Californium Mo Molybdenum Ta Tantalum Cl Chlorine N Nitrogen Tb Terbium Cm Curium Na Sodium Tc Technetium Co Cobalt Nb Niobium Te Tellurium Cr Chromium Nd Neodymium Th Thorium Cs Cesium Ne Neon Ti Titanium Cu Copper Ni Nickel Tl Thallium Dy Dysprosium No Nobelium Tm Thulium Er Erbium Np Neptunium U Uranium Es Einsteinium O Oxygen V Vanadium Eu Europium Os Osmium W Tungsten F Fluorine P Phosphorus Xe Xenon Fe Iron Pa Protactinium Y Yttrium Fm Fermium Pb Lead Yb Ytterbium Fr Francium Pd Palladium Zn Zinc Ga Gallium Po Polonium Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 12
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 13 This page has been left blank intentionally.
Nedbank | Capital Part II: Geol og y and g enesis of SA’s main economic orebodi es Geology and genesis of SA’s main economic orebodies
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 15 Metals and minerals exploited in South Africa Let’s begin with geology (miners often tend to skip this part!). This planet we live on may seem smooth and shiny, but underneath the surface there is super-hot liquid churning away. The earth’s plates shift, causing cracks to form, and these provide conduits for the super-hot liquid or magma to move up through the cracks. This cools and deposits the metals and minerals we are after. Pressure. Heat. Cracks. Fractures. Upsurges. Folds. Anomalous situations. That’s the pointer. Something out of the ordinary (Prof Hrebar). Geologists use various techniques to look for and find correct locations most suitable for the deposition/emplacement of minerals. Walking the land, picking up and examining rocks is still ALL necessary. But today’s techniques incorporate methods from physics, chemistry, materials technology, mathematics and computers to help geologists find their way. The starting point is rock structure. ‘Hard rock’ geology is the area of most significance. The main rock groups are igneous, sedimentary and metamorphic.  Igneous: This is when magma from the earth’s core rises and cools below the earth’s surface, or erupts in the form of a volcano and spews overland; two main types of orebodies are associated with igneous rocks.  Magmatic (layered intrusions): Ore crystallises in magma in layers: Ni, Pt, Cr, Fe, etc.  Hydrothermal: Magma heats water. Water dissolves minerals and deposits them elsewhere.  Sedimentary: Result of weathering/erosion and deposition (of any pre-existing rocks). Host to mineral aggregates, coal, sandstone, uranium, limestone, etc.  Metamorphic: Any type of rock that has changed, usually due to pressure or temperature. Affects grade, tonnage and size, but not deposit type. Igneous (rocks initially liquid) Metamorphic (folded rocks) Sedimentary (flat rocks) eg South Africa’s Bushveld Complex eg The Cape folded mountains, Himalayas and Alps eg The Karoo, Witwatersrand (gold) supergroup Four major STEPS to making minerals PAY  Geology  Mining  Metallurgy/refining  The market and selling the product Three major rock groups  Igneous  Metamorphic  Sedimentary
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 16 Genesis and uses of some of SA’s more important minerals Metal Chemical symbol Genesis Uses Antimony Sb Very similar to copper, it occurs in the geologically complex greenstone belt rocks where it finds areas of lowest stress Fire retardant Coal C Coal occurs in shallow, flat rocks which were plants and forests only a few 100 million years ago Power Copper Cu Copper occurs mainly in shattered rocks near the east side of the Pacific where the ocean floor is moving under the Americas, causing remelting and fractioning of rocks. Again (like gold) because of its low melting point, it finds its way into any breaks or shattered rock Cables, wire, motors Diamonds Dm Diamonds originate in pipe-like features called Kimberlite pipes. They also occur in rivers, beaches and shallow continental shelf deposits as erosion takes diamonds to the oceans For women (aphrodisiac) Gold Au Gold occurs mainly in sedimentary (flat rocks) deposits. It also occurs in greenstone belts (geologically complex rocks) and in shattered rocks. Gold has a low melting point and will always be first to melt and find the zone of least stress or least resistance For women (aphrodisiac) Heavy mineral sands Zr Found on beaches (or where beaches used to be millions of years ago) Paint Manganese Mn Manganese occurs in sedimentary rocks (formed in water) along with iron ore deposits Steel making Nickel Ni Nickel occurs mainly in igneous rocks (rocks from deep down in the earth) which cooled millions of years ago Stainless steel Palladium Pd Occurs in igneous rocks Cars, teeth and electronics Platinum Pt Occurs in igneous rocks For women, fast cars and fuel cells Rhodium Rh Occurs in igneous rocks Cars + cufflinks + plating white gold Ruthenium Ru Occurs in igneous rocks Fuel cells Tantalum/ Beryllium Ta/ Be Occurs in pegmatite rocks Metallurgy Uranium U Found in sedimentary rocks, i.e. coal in Karoo in SA and associated with gold in Wits Power (when used responsibly) Zinc Zn Zinc deposits occur in high-grade metamorphic zones (very altered rocks – altered by temperature and pressure.) Galvanising Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 17 Genesis and geometry of ore bodies – a pictorial illustration Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 18 Simplified geological map of South Africa Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold)
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 19 The geology of South Africa is shown on the map as the systems of rock outcrops on the surface of the region. Structurally, however, the rock systems (actually called supergroups) show large stable areas called cratons and deformed areas called mobile belts. One finds diamonds only (with one exception to the rule in Australia) in cratons and base metals in mobile belts. The diagram below shows the simplified structural framework of SA geology with cover rocks removed. Ancient cratonic nuclei and surrounding metamorphic provinces Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold)
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 20 Seven main geological systems* in Southern Africa Age (billion years) System Mineral Simple South African geological column 1 0.6 Karoo system Thermal coal, uranium 2 1.5 Waterberg system Coking coal (actually in the Karoo system) 3 2.1 Bushveld Complex PGMs 4 2.3 Transvaal system Iron ore, manganese, base metals 5 2.7 Witwatersrand system Gold, uranium 6 3.7 Greenstone belts Gold, antimony 7 4 Granite basement Copper, mica Source: R Hochreiter * Real geologists prefer the term supergroup Localities of South Africa’s major mineral deposits Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold)
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 21 Geological column of South Africa Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 22 The Witwatersrand system Arguably, South Africa’s most important geological system, the Wits basin contains the world’s largest gold resources and has been producing gold since the metal was discovered in 1886 (the basin is older than 2,700 million years). The gold-bearing reefs outcrop along the edges of the basin (Evander, Springs, Germiston, Randfontein, Carletonville, disappear until Klerksdorp, then disappear again until Welkom). They dip towards the centre of the basin. No outcrop of this basin has yet been found on the eastern side. Simplified geology of the Witwatersrand basin (younger cover rocks removed) Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold) The geological map shown above (note, covering rocks of the Wits supergroup removed) shows the West Rand group of rocks where gold mineralisation occurs. Gold deposits only occur on the north, west and south sides of the basin.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 23 The whole area was once a large inland sea with gold-rich rocks (mountains) around its edges (north, west and south). Massively violent storms around 3 billion years ago smashed up the mountains and deposited the boulders, grit, sand, mud and of course the gold into the inland sea (well, if you are a placerist, this is what you believe). Over time, the sea was buried by further eroded material and Ventersdorp lavas. It was cracked and broken up by movements in the earth’s crust, but kept its shape. Around 2 billion years ago, a massive (estimated 40km diameter) asteroid hit the basin at Vredefort (see map above) from the south-east of the basin and slammed around 100km into the earth. This could have triggered the genesis of the Bushveld Complex (see next section on geology). Hydrothermatists believe this incident melted and mobilised the gold deep within the earth’s crust. This hydrothermal fluid moved upwards and deposited the gold in the conglomerate beds where it is found today. Simplified section of the Witwatersrand basin Source: R Hochreiter and D le Roux
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 24 There are eight reefs that have been mined in various areas of South Africa at various times over the last 120 years, as well as large quantities of uranium, silver and osmiridium. The whole sequence is about 5km thick from bottom (Dominion Reef) to top (Black Reef). Witwatersrand supergroup – anyone see the impact craters? The supergroup is estimated to be between 2300-2800my making it older than the Bushveld Complex and younger than the Barberton greenstones. It is classified as Achaean in age (very very old!). Source: Mineral Deposits of Southern Africa. Modified after Brock and Pretorius, 1964, showing the location of main cities and towns around the largest goldfield in the world if cover rocks are stripped off. Genesis Violent storms in a pre-existing greenstone belt-like mountain land eroded the rocks and deposited them on the shores of a large inland sea. No oxygen existed at the time and very violent electric storms occurred, with lightning striking the iron pyrites (with which gold is associated), breaking the rocks and assisting erosion. These were ground to pebbles by storm-flooded rivers, together with the quartz and volcanic ash/lava, and deposited with the gold on shores covered in algae (algae, like carbon, attracts gold particles, almost like electroplating) which also trapped gold particles out of the highly acidic mush/water into large tidal flats, until the next storm covered the gold concentrations. This probably went on for 200 million years before the final (last) reef (the Ventersdorp Contact Reef – VCR) was laid down by very violent volcano-induced storms, which finally covered the whole sequence with thick lava, marking the end of the genesis of the world’s most-famous and biggest gold deposit. Deep burial and low-grade metamorphism resulted in today’s deep, hard gold deposits in the Witwatersrand system.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 25 The Bushveld Complex (BC) The Bushveld Complex is host to the world’s largest platinum field. Possibly initiated by the Vredefort asteroid impact, the Bushveld Complex rivals the Wits Basin as the most important (economically) geological unit in South Africa. It was emplaced about 2,000 million years ago. The occurrence of platinum reefs (marked as Pt) in the Mafic zone in the Bushveld Complex is shown below. Geological features – major mineral occurrences of the Bushveld Complex Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold) The Bushveld Complex contains 90% of the world’s platinum, palladium and rhodium resources. The two main platinum-bearing reefs are the Merensky and UG2 reefs. The whole sequence of Bushveld Complex rocks is around 8km thick.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 26 Geological column of the Bushveld Complex – main platinum-bearing reefs Source: R Hochreiter and D le Roux Genesis Two possible theories on how PGMs came into being in SA are discussed below. The classical theory is the mode of formation of the world’s greatest treasure trove of PGMs via a molten rock injection into the earth’s crust. Several injection phases occurred and the whole gambit then took 40 million years to cool (and still cooling), plenty of time for very distinct layers to form and crystallise out the platinum minerals when the chemistry was right. PGMs are found in three different lobes or limbs: the classical Western Bushveld (Rustenburg/Northam); the Eastern Bushveld (Maandagshoek/Dwarsrivier) and the ‘half lobe’, the Northern Bushveld (Mokopane), are separated into distinct areas on surface and may be connected to each other at depth, again depending on your belief. The cause of the molten rock injection could have been an asteroid impact 200km south at Vredefort.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 27 Their sequence of layers is similar, yet different. It is possible that three different vents injected lava (magma) from the same source at depth. The three different vents could have been feeder dykes as the grade of PGMs, for example, increases with depth to a maximum at 3,000m. Secondly, a theory gaining credibility is that a massive asteroid hit the earth at the site of the Bushveld Complex, smashed 100km into the earth’s surface and caused the genesis of the Bushveld, the Zimbabwean Dyke, the major faults and lineation of South Africa’s geological terrain and remelting and refreezing over a very long time. The nub of the theory is that the moon has 300,000 impact craters – the earth should have even more; platinum is 18 times heavier than water (gold only 16x, rhodium 20x, palladium 14x) – so what are all these heavy precious metals doing at the surface of earth if the earth was red-hot 4.6 billion years ago and some of the heaviest elements (rhodium and platinum) sank to the centre of the earth, 6,400km below surface. The asteroid (if this theory is true) was probably from the asteroid belt, a planet that broke apart and which may contain solid chunks of PGMs/nickel/copper and so on. Take your pick; there are several other possibilities but, for now, these two should suffice. Localities of South African meteorite impact structures ( ) The map shows the known impact craters of South Africa. Personally, I believe there are many more, but these are now covered by Karoo and younger rocks. It is possible the Vredefort asteroid impact had a cataclysmic subcontinent-wide shattering effect, which allowed the penetration of deep, heavy, liquids containing platinum group metals to come to the surface through the shattered crust and resulted in the platinum deposits we see today in the Bushveld Complex. Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold)
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 28 The Karoo system The Karoo system, other than being famous for hosting South Africa’s vast fossil wealth, is also host to all our coal deposits. These were formed when SA was still part of the larger Gondwanaland and our coalfields are related to those found in the Americas and Australia. Geological distribution of the Karoo supergroup Source: Mineral Deposits of Southern Africa – Major coalfields of Southern Africa
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 29 South Africa has 19 coalfields, with the Highveld, Witbank and Ermelo coalfields supplying most of the coal required for power in the last decade. The Karoo and Cape supergroups are primarily sedimentary sequences of rocks – the main economic value in the Karoo supergroup is in its coal. The whole sequence is probably 10-15km thick. Geological column of the Karoo and Cape supergroups Source: R Hochreiter and D le Roux
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 30 Geological map of the Karoo supergroup Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold) The Karoo supergroup is widespread, the youngest rocks in South Africa and mainly sandstones, shales (mudstones) and some grits Genesis This is the youngest system, formed about 600 million years ago, and is the only one to develop in the presence of oxygen. A large inland sea was responsible for a less violent deposition of sandstones, shales, muds and coal. Life started on earth around 600 million years ago and plants, animals and other life forms proliferated, were buried and over time became fossilised or became coal. The clays exploited in this geological region are younger alteration products that formed through weathering.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 31 The Transvaal system Host to the world’s largest manganese field, this system is around 2,300 million years old. Geological column of the Transvaal supergroup Source: R Hochreiter and D. Le Roux The Transvaal supergroup contains some minerals of economic value. The whole sequence is probably 3km thick. Genesis This system started where the Witwatersrand left off. A large inland sea facilitated the formation of large deposits of dolomite (calcium/magnesium rocks) and an environment conducive to forming iron and manganese deposits (in the Northern Cape). Base metals were deposited among the dolomites of the old Transvaal area, although not to any great extent. Gases from the Bushveld Complex under the Transvaal system formed fluorite, lead and vanadium deposits in the Transvaal system.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 32 The Waterberg system The world’s largest field of nothing. This system is around 1,700 million years old. Geological column of the Waterberg system Source: R Hochreiter and D Le Roux The Waterberg system contains few minerals of economic value. The whole sequence is probably 2-3km thick. Genesis The Waterberg geological system also formed in a large inland sea but has few, if any, associated economic minerals.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 33 Greenstone belts The world’s most-interesting geology and oldest rocks on earth are to be found at Barberton in the Mpumalanga province of South Africa. These are between 3,000 to 3,600 million years old. The main greenstone belts of South Africa Source: Mineral Deposits of Southern Africa The earliest life forms (algae) were discovered in the Barberton greenstone belt. They are 3.6bn years old and were studied by NASA before Neil Armstrong went to the moon. The map above illustrates the setting of the Murchison greenstone belt relative to other greenstone belts and the younger cover rocks. The greenstone belt contains gold, antimony and smaller amounts of other minerals – very old and deformed rocks. Oldest-known life form (algae) occurs in the pillow lavas at 3.6bn years of age.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 34 Geological map of Barberton greenstone belt (New Consort, Sheba, Agnes gold mines) Source: Mineral Deposits of Southern Africa The Barberton greenstone belt – correlation to three other belts Source: R Hochreiter and D Le Roux
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 35 Geological sketch of Pietersburg greenstone belt (Eersteling goldfield) Source: Mineral Deposits of Southern Africa Geology of the Murchison greenstone belt (see mineral occurrences) Source: Mineral Deposits of Southern Africa
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 36 Genesis Greenstone belts contain the oldest rocks on earth, >3.5 billion years old. The sun is 4.5 billion years old (and will probably burn for another 5 billion years), to put the age of the earth in perspective. Greenstone belts are highly complex geological occurrences; they were probably islands of lava and volcanic debris on which volcanoes spewed out all sorts of metal. Subsequent folding, fracturing and squeezing of rocks in these islands caused gold, antimony, etc to start moving again and find their way into areas of least pressure. Hence, any arch, fault, fold nose, space (anything where there was no or little pressure) was filled with the low-melting point gold/antimony, mercury, etc. The earth, 3.5 billion years ago, was highly unstable and all sorts of minerals were spewed out from deep down and mixed in with the islands that were trying to form the first continents. The earth was probably smaller (higher gravitational constant than today’s 9.8m/s/s) and hotter, and much more prone to earthquakes and violent storms than we see today. Hence, the geological processes epitomised in today’s remnants of these early continents, ie the greenstone belts, are absolutely fascinating in their geology and the contained minerals. Below is a schematic diagram of an Archaean volcano-sedimentary complex showing the possible relation of mineralisation (gold and sulphides) to various parts of the volcanogenic model (modified after Goodwin and Ridler, 1970; Hutchinson et al, 1971; Karvinen, 1981). Schematic diagram of an Archaean volcano-sedimentary complex Source: CR Anhaeusser
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 37 A simplified structural map of the Jamestown and Sheba Hills area of the Barberton mountain land shows the positions of the more-important folds, faults and fractures in the region. Some 75% of all gold mined in the Barberton area has come from the area shown, which also has the three largest gold mines in the district. Barberton mountain land Source: CR Anhaeusser
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 38 Granite basement Host to the world’s largest diamond deposits (although they also seem to be associated with cratonic areas that have extensive outflows of basaltic lavas), these rocks are 2,500 to 4,500 million years old. The map illustrates the exposed Archaean granite-greenstone terrain of the Zimbabwe and Kaapvaal cratons in southern Africa. The cratonic areas are enveloped by high-grade metamorphic belts and were intruded during the Proterozoic era by the Great Dyke in Zimbabwe and the Bushveld Complex in South Africa (after Anhaeusser, 1976a, b). The granite basement rocks of southern Africa Source: Mineral Deposits of Southern Africa
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 39 Distribution of granite basement rocks in southern Africa and the greenstone belts Source: R Hochreiter and D Le Roux Genesis Generally, the granites have few minerals of economic value in South Africa (other than some esoteric minerals such as tantalite, beryl, lepidolite (lithium mineral), emeralds, sapphires, mica, etc). In Limpopo Province, mica is mined at a town called Mica, near Phalaborwa. In Zimbabwe, near a town called Bikita, Bikita Minerals mines a pegmatite (a remelted granite due to some disturbance in the crust containing rare minerals and elements) for lepodilite (lithium). In the Filabusi area, beryl, a type of emerald, and emeralds themselves are mined from a highly metamorphic granite/greenstone contact.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 40 Diamonds Diamonds are formed deep in the earth if there is elemental carbon present. The diagram below shows the depth (150-300km) where carbon becomes diamond as a stable form at very high pressures. On surface, where there is no pressure, carbon’s stable form is coal. For diamonds to remain in diamond form, they must be brought up to surface at very high speed with an instantaneous drop of pressure and rapid cooling. If this does not happen (ie pressure drops slowly and temperatures remain high), the diamonds ‘burn’ and become CO2 gas, or frizzle into nothing. Hence, for a diamond to come to surface, there must be a volcano which ensures zero pressure and low temperatures. That is why so many kimberlites are barren of diamonds. Kimberlites are rocks that invariably host diamonds and have been brought to surface from the deep lithosphere. Where diamonds are formed Source: Elkedra NL
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 41 Kimberlites The volcano that transports diamonds from deep below the earth’s surface finds its way to surface through deep cracks and fissures called dykes. On reaching the surface, the volcano erupts, often leaving behind a carrot-shaped body of magma, known as a diatreme. The diatreme is topped by a pyroclastic tuff (a real mish- mash of rocks), which is the detritus from the explosion that falls back to earth. The ‘pipe’ left behind containing volcanic rock, mantle fragments, others minerals and, rarely, diamonds is called a kimberlite, after the town in South Africa where these pipes were first discovered in the 1870s. The other rock type that hosts diamonds is called a lamproite. Generally, kimberlites are found in clusters with up to 100 sometimes found close to each other. However, not all tend to be of the same age and even within a single occurrence, several different volcanic events over different times may be present, adding to the complexity of sampling and proving the economic potential of the orebody (a kimberlite’s neighbour generally doesn’t tell one anything about its grade or age). Ages of southern African kimberlites Million years Examples Country 65-85 Kimberley group 1 pipes and dykes RSA Orapa and Tswabong clusters Botswana 115-205 Finsch, Swartruggens, Dullstroom RSA Group 2 pipes and dykes Swaziland 240 Twaneng cluster Botswana 550-600 Venetia and River Ranch RSA Kimberlites Zimbabwe 1,200 Cullinan cluster (Premier Mine) RSA Martins Drift cluster Botswana 1,700 Kuruman kimberlites RSA >2,700 Wits supergroup RSA Source: J Bristow Morphology of a kimberlite pipe Source: J Bristow
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 42 Alluvial diamonds More than 70% of mined diamonds come from primary sources – kimberlites and sometimes lamproites. Over long periods, however, most kimberlites have been eroded – some by one or two kilometres – with the contained diamonds liberated and transported by glacial movement, water and wind to find their way into rivers, and ultimately the ocean. Mining alluvial gravels produced all the world’s diamonds until the discovery of the Kimberley kimberlite field in the 1870s. Distribution of South African alluvial diamond deposits Source: Redrawn from the Mineral Resources of South Africa
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 43 Open-pit mining for alluvial diamonds Tonnes (sometimes over hundreds of tonnes) of rock have to be moved to get down to the bedrock (old river beds) where diamonds are located. A small pit (70m deep) just to sample diamonds (in an attempt to estimate a resource). Soil and sand being moved almost to the horizon Source: R Hochreiter
Nedbank | Capital Part III: Mineral r esources and r eser ves Mineral resources and reserves
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 45 “I know that most men, including those at ease with problems of the greatest complexity, can seldom accept the simplest and most obvious truth if it be such as would oblige them to admit the falsity of conclusions which they have proudly thought to others…” Count Leo Nicolaivithch Tolstoy A short (and sad) case study of why resources are important  In mid-1995, an unknown Canadian exploration company announced a gold find in Indonesia. On the basis of a single borehole and sampling over one week, the geologist claimed and estimated “geologic potential” of… 8 million ounces (Moz) of gold (a sizable deposit!).  Within months, the ‘measured, indicated and inferred resource’ was 2.6Moz and the ‘total resource’ was 20Moz, with analysts stating that “to calculate a resource based on a few cross-sections is a speculative exercise”; however the market capitalisation of the share rose from $100m to $2bn (measured+ indicated + inferred and total resource should be one and the same).  July 1996, with four borehole samples, the “total resource is a massive 47Moz”. The share’s market capitalisation rose to $4.2bn.  February 1997, the ‘total resource’ is 71Moz. Market capitalisation of $5bn.  April 1997, there is no gold resource. Probably less than 20 ounces of alluvial gold and cheap jewellery had been purchased to ‘salt’ the drill samples. Bre-X goes into liquidation shortly thereafter. The geologist mysteriously falls out of the plane somewhere over the forests, never to be seen again. This and numerous other mining scandals over the years have forced regulatory and professional bodies to set strict definitions of resources and reserves that must be used by mining and exploration companies in reporting. These codes (JORC – Australia, SAMREC – South Africa, CIM standards – Canada, IMMM reporting code – UK and SME reporting guide – USA) set out the following definitions:  a mineral resource is a concentration of naturally-occurring material in or on the earth’s crust that is of economic interest due to its potentially profitable extraction.  a mineral reserve is the portion of the mineral resource, including dilution of waste material that would occur in the mining process, which can be economically mined at current price, cost and regulatory conditions.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 46 As geological information increases, mineral resources can be subdivided into the following categories (with geologists’ terminology shown in italics):  Inferred (ie thumbsuck) – the resource is assumed from projections of geological information. Mining stock promoters like to use this classification!  Indicated (ie connect the dots) – resource tonnage, grade and quality are estimated with reasonable confidence from exploration, but at sampling intervals that are too wide to confirm the resource continuity.  Measured (ie very sure, sort of) – resource tonnage, grade and quality can be estimated with a high level of confidence. Likewise, mineral reserves are split into the following:  Probable reserves (ie connect the profitable dots) – the economically mineable part of the indicated and measured resources.  Proven reserve (ie there is so much information at this stage that even a geologist will use the term!) – the economically mineable part of a measured resource. Relationship between mineral resources and mineral reserves Source: SAMREC It is important to understand that the grade of the resource is that measured in-situ. To be classified as a reserve, the in-situ ore grade must be sufficiently high to be mined at a profit, including all waste material that would be extracted along with the ore-bearing rock. Reserves and resources are dynamic and can increase or decrease with time and information. Mineral resource estimates are not precise and depend on the amount of geological information available. Reserves will vary depending on mostly external factors, such as long-term commodity price trends, that would determine whether further resources become profitable to mine or whether previously determined reserves are no longer profitable. Exchange rates and costs (capex and opex) also impact on these categories.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 47 Interpretation of borehole drill results Let us consider a set of drilling intersections. A very conservative geologist’s interpretation.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 48 A conservative geologist’s interpretation. An optimistic geologist’s interpretation.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 49 A very optimistic geologist’s interpretation. An extremely optimistic geologist’s interpretation.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 50 A geophysicist’s interpretation. The mining engineer’s interpretation, used to bluff fund managers, accountants, BEEs, etc. Source: Prof M Hrebar
Nedbank | Capital
Nedbank | Capital Part IV: Mini ng methods and exploi tati on Mining methods and exploitation
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 53 Mining methods Mining and exploitation of mineral deposits is an exercise in THREE-dimensional geometry. Many people have difficulty thinking in THREE dimensions (never mind FOUR dimensions!), because we live in a TWO-dimensional world. Most inhabitants of planet earth have a ONE-dimensional thought process as evidenced by the human breeding programme that has led to the current state of global over-population! All orebodies have some three-dimensional shape. The trick is how to get tunnels (access) into and around them to get the valuable portion (the ore of the orebody) back to the surface, if it’s not already on surface, and into an extraction plant. Orebodies come in ANY shape or size; from ball shaped, to pear shaped, from balloon shaped to rod shaped, from flat shaped to curve shaped – the one-dimensional thought process shows clearly! Mostly what miners think about every 30 seconds on average is breast stoping, the most-common mining method in South Africa. Exploiting these shapes is fairly easy when the orebody is of high quality, money is no obstacle and bodies are available to do the mining. Problems arise when the orebody is not that attractive and profitability is marginal. Ingenious methods of access then need to be employed, with the help of, where possible, new technology. Whatever the shape of the orebody, a shaft needs to be sunk into the orebody, usually with long lead times. Access to the orebody from the shaft is via drives, haulages and cross- cuts (tunnels). Finally, the valuable part of the orebody is exploited using different mining methods that are described in the following pages. Read on.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 54 Underground mining Study the next two diagrams carefully. These are the two main methods used in South African underground mining (nearly all SA gold and platinum mines use this method). Thin tabular reef type Description of method: Panels are blasted daily in the direction shown. The blasted ore is scraped down to the next gully and then scraped to a centre gully from where it is scraped into ore passes. The ore passes lead to loading ‘boxes’ that disgorge the ore into small trains which carry ore to the shaft ore passes. These lead to the shaft bottom from where ore is hoisted to the surface. Application: Thin, tabular reef mining of widths of 0.8-1.5m. Advantages: Few, but no new alternatives yet to the labour - intensiveness of this method. Disadvantages: Narrow, hot, uncomfortable, very labour- intensive, can’t really use machines. Dangerous working conditions. Mines: Most SA Wits gold mines. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 55 ‘Massive’ orebody type Description of method: Holes are drilled in ‘fans’ in the orebody. These fans are blasted in slices. The ore is loaded by LHD and transported to the ore passes where it gravitates down to the bottom of the shaft. From there it is loaded into skips which hoist ore to the surface. Application: Large, vertical massive, rounded orebodies. Advantages: Low-cost, no fill required, can be highly mechanised. Disadvantages: Safety – LHDs and workers are exposed to rock falls. Mines: Palabora. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 56 Shrinkage Description of method: Holes are drilled in fans in the orebody. These fans are blasted in slices. Holes are drilled in the solid rock above the broken rock. After blasting, enough broken rock is drawn out of the bottom cross-cuts to allow space for the next holes to be drilled and blasted. Rock drawn out of the bottom drawpoints is taken to surface. Application: Only a certain amount of broken rock is drawn out of the bottom of the stope to allow drilling crews to drill and blast the next slice above their heads. Advantages: Low-cost, no fill required. Safe mining method, relatively speaking. Disadvantages: Ore tied up until stope totally drilled out and blasted. Mine: Barberton, Galaxy Gold Mine, Pan African Resources, Vantage Gold. Source: Atlas Copco Handbook
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 57 Sub-level stoping Description of method: Tunnels are developed in the orebody. From these tunnels, a series of ring holes are drilled and blasted. The broken ore falls to the drawpoints and is taken out to surface. Application: Rock (ore) is blasted into an open space and collected by machines at the cleaning level. Advantages: Safe, remote blasting. Disadvantages: Dilution control is difficult. Mine: Consolidated Murchison. Source: Atlas Copco Handbook
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 58 Sub-level caving Description of method: Tunnels are developed in the orebody. Holes are drilled vertically upwards and blasted. Using trucks and LHDs, the ore is transported to ore passes where it gravitates to the bottom of the mine shaft and is hoisted out to surface. Application: This method is used when the rock does not break by itself, for example at Palabora, where the undercut area is large enough to break under its own weight. Advantages: Highly mechanised, safe. Disadvantages: High-cost, dilution control difficult. Mine: Kiruna mine in Finland Source: R Hochreiter modified after Atlas Copco Handbook
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 59 Cut-and-fill Description of method: Holes are drilled and blasted on the top level. The broken rock is channelled down through the ore passes to the transport drift and taken to surface via shafts. Application: This is the main mining method used in the Sudbury nickel-mining area, but not used much in South Africa. The great advantage of this method is that the orebody can be mined out accurately without much waste material diluting the ore. It is also safer filling a cavity underground than leaving it open with all the concomitant safety problems of things falling on people or machinery. Advantages: Low dilution, good safety. Disadvantages: Expensive as concrete is used to fill mined-out areas. Mines: Barberton/Norilsk, Stillwater, Inco/Falconbridge. Source: Atlas Copco Handbook
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 60 Block caving Description of method: The ore ‘hanging’ above the slot, which is blasted above the draw-bells (finger raises), breaks up under its own weight and falls into the draw-bells. This ore breaks up further with secondary blasting if necessary, and is transported to underground crushers from the loading level. Application: Palabora, where the orebody breaks due to gravitational forces being sufficient to fracture rock. Advantages: Very cheap, no explosives needed in primary breaking. Disadvantages: Large rocks can block drawpoints as has happened in Palabora, delaying full production (by almost two years!) Mines: Palabora. Source: Atlas Copco Handbook
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 61 Longhole stoping Description of method: Holes are drilled from tunnels alongside the orebody (tunnels can be inside the orebody and holes are drilled down parallel to the ore) and blasted. Small loading cross-cuts from the tunnels are used to load ore and transport it to the nearest ore pass. From the ore passes, it is loaded into hoists in the shafts which take the ore to surface. Application: Holes are drilled inside the orebody on dip. Ore is blasted and collected on the level below by an LHD vehicle. Advantages: Large tonnage generator. Lower-cost than cut- and-fill. Disadvantages: Dilution more difficult to control; accurate drilling necessary. Mines: Stillwater, Limpopo Platinum. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 62 Breast stoping Description of method: Holes are drilled as shown (in the direction of advance) and blasted sequentially into the strike gully. Scrapers then pull the remaining broken ore into the strike gullies, where other scrapers pull ore into a centre gully; from there the centre gully scraper pulls ore into ore passes. Note how inefficient this all is. Application: Breast stoping is used extensively in narrow tabular orebodies. Hence, panels are blasted sequentially more or less in the direction of strike while cleaning is done via scrapers. Advantages: Flexible at shallow depths (<1,000m). Disadvantages: High-cost, dangerous at +1,500m depth due to high induced rock pressures, inefficient, highly labour-intensive. Mines: Beatrix, Harmony, Driefontein, Implats, AngloPlat. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 63 Longwall stoping Description of method: A long, long length of face (hence the name) is drilled and blasted. Broken ore is scraped down to the transport gully and scraped back to the centre gully ore passes. From there, ore is transported via tunnels and shafts to surface. Application: Useful in high- stress (deep) thin tabular orebodies such as SA gold mines. Advantages: Best for destressing underlying tunnels. Disadvantages: Very high cost, stress-induced rock falls and pressure bursts can occur if not carefully controlled. Mines: Western Deeps, Vaal Reefs, AngloPlats. Source: Atlas Copco Handbook
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 64 Bord-and-pillar Description of method: Holes are drilled and blasted in such a way to leave pillars in the ore at regular intervals. Using a scraper or LHD vehicle, broken ore is moved to transport drifts and sent to surface via shafts. Application: Used in low stree (shallow) thick tabular orebodies such as coal mines or platinum mines with thick reefs. Advantages: Highly mechanised, very low cost, very efficient, very safe. Disadvantages: Many LHD vehicles need skilled labour for maintenance. Difficult to remove pillars after the area is mined out – low extraction rates. Mines: Kroondal, AngloPlats, most underground South African coal/manganese mines. Source: Atlas Copco Handbook
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 65 Up-dip (and down-dip) stoping Description of method: Holes are drilled in an up-dip direction and blasted. Broken rock is scraped to gullies, down to the ore passes and out to surface. Down-dip stoping is the reverse of up-dip stoping, ie in down-dip stoping, the face is pushed in a down-dip direction, the opposite direction to the diagram. Application: Used in shallow, thin tabular orebodies. Advantages: Most-effective method of mining shallow tabular reefs. Disadvantages: Development and stope preparation more costly than breast or longwall stoping. Mines: Lonrho Platinum and AngloPlats. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 66 Surface mining The two main methods used in South African surface mining are shown on the next two diagrams (nearly all South African coal mines use this method). Open-pit mining Description of method: Vast benches of ore are drilled, blasted, loaded on gigantic trucks and transported to surface. This is a schematic of the massive Palabora pit over 1km deep, 5km across and 11km to drive to the bottom of the pit. Application: Two new shafts go down vertically next to the pit to access the new underground mine which is mined using the block-caving method, 500m below the bottom of the pit. Advantages: Cheaper than underground mining. Disadvantages: Large amounts of waste generally need to be mined in getting to the ore. Mines: North American Palladium, AngloPlats, Palabora. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 67 Opencast (strip mining) Description of method: Most South African coal mines, if less than 80m deep, use massive machines called draglines which strip large tracts of countryside to expose the coal bed underneath. Application: Large, shallow (less than 80m), thick orebodies, extremely well-suited to shallow coal seams in the eastern part of South Africa. Advantages: Very cheap. Disadvantages: High capital cost; if a dragline (very large automated shovel) which has a bucket (as large as a medium- sized swimming pool) capsizes, you can imagine the consequences! Mines: All large opencast coal mines in SA. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 68 Examples of underground mining methods Drilling at face in a stope, after which explosives are placed in the hole, the face blasted and broken rock removed from the stope. Broken ore is transported underground using a load haul dump vehicle (LHD). Ore is hoisted up the shaft and transported to the metallurgical plant. Source: Russell & Associates
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 69 Examples of open-pit mining Operations at an open-pit mine with drilled holes ready for blasting. The orebody is blasted using, at times, thousands of kilograms of explosives. Broken ore is loaded using large shovels and trucks and transported to the metallurgical plant. Source: Metorex, Chromex and R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 70 Mining in shallow water Diamonds and heavy mineral sands are recovered through mining methods in shallow water (up to 15 metres in depth). Description of method: Large floating dredges suck up vast quantities of sand from man- made ‘ponds’. These are sent through a plant on the dredge that extracts diamond or titanium, ilmenite and rutile (heavy mineral sands) and the rest is dumped overboard. Application: Sucking up gravels by vacuum machines on the continental shelf off the west coast of South Africa to recover diamonds transported to the sea by the Orange River and others that changed course over many millions of years. Crawler vehicles or man-held vacuum pipes are lowered to the seabed and gravels are systematically sucked up, with barren gravels pumped back overboard. Advantages: No real alternative to this method. Disadvantages: Expensive, at the mercy of bad weather, environmentally devastating. Mines: Diamond mining on ‘drowned’ beaches off the west coast of South Africa. Dredging sands for titanium and heavy mineral sands in St Lucia and the Cape west coast. Seabed crawler – used in recovering diamonds from the floor of the seabed Source: MMP
Nedbank | Capital
Nedbank | Capital Part V: M etallurgical r ecover y and refi ning Metallurgical recovery and refining
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 73 Metallurgical recovery circuits Ore from the mine is transported to a central ‘factory’ or processing plant where the valuable part of the ore is removed. Usually, the valuable part of the ore is in very low concentrate, ie in parts per million. For example, a grade of gold from a gold mine may be around 5 grams per tonne (5g/t). This is equivalent to five parts per million (5ppm). Alluvial diamond mining is usually carried out at grades of 0.5 carats per 100 tonnes (cpht). This valuable 5ppm is what the metallurgical circuit attempts to remove. I say attempt, because very often metallurgists will throw away a large portion of the hard-won valuable content of the ore and blame it on the miner underground for mining waste (and vice versa)!. The battle between miner and metallurgist continues even today. It has however created opportunities for those willing to reprocess ‘waste’ mine dumps, an exercise easily evident in and around Johannesburg (these dumps run at grades of ~0.3g/t, and are still economically viable to some). Essentially, in a metallurgical plant, the ore is crushed, ground down to much less than 1mm in diameter then thrown in a tank with chemicals that extract the valuable part. This is called the concentrate. Refining Refining the concentrate takes place through hot (melting the concentrate) or cold (electric or electrolysis) methods of treating the melted material. Many different types of circuits exist. A few of these have been selected and some typical metallurgical circuits are shown in the next few pages:  Antimony  Heavy minerals  Coal  Platinum and PGMs  Copper  Zinc/lead  Diamonds  Zinc  Gold
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 74 Antimony Antimony recovery plants are finicky and temperamental! The antimony refinery uses heat treatment and chemical means to upgrade it to saleable product. Gold is a by-product of antimony mining in South Africa (eg Cons Murch) Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 75 Coal Wash it and sell – that’s what you get for $90/tonne of coal. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 76 Copper Copper recovery plants always remind me of a ‘factory’, they are so huge. The copper recovery circuit (shown here is a schematic of the huge Palabora plant) is relatively simple, but needs to be able to process large volumes of ore and concentrate. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 77 Diamond circuit Breathtakingly simple plant. Sometimes, actually quite often, grease tables recover very few diamonds and most are in tailing dumps all around South Africa. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 78 Gold The gold recovery circuit is blindingly simple. The furnace is small (1m diameter) and the bars are poured straight out of the furnace and sold to Rand Refinery. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 79 Heavy minerals Incredibly complicated and finicky plants – I will not even try to explain! Source: R Hochreiter Platinum and PGMs
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 80 Recovery of PGMs is simple, except at the refinery level. The precious metals refinery (PMR) resembles a gigantic chemistry set with colourful tubes of glass. The main methods used in the PMR are either solvent extraction or ion exchange liquid methods, both involve flowing in a counter-flow direction and metals jumping from one liquid to the other. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 81 Actual metallurgical process at Zimplats (platinum) The Zimplats process is a good, simple, example of a concentrator plant. Essentially it comprises milling, three-stage floating and thickening. The concentrate is bagged and transported to a smelter. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 82 Actual metallurgical process at Zimplats (platinum) cont’d Zimplats smelter and converter plant is an industry standard. Essentially the concentrate is dried, fed into the smelter, poured into a ladle, transferred to a converter (where oxygen is blown through the matte to eradicate the sulphur) and then poured into ingots. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 83 Zinc circuit Straightforward base metal recovery plant as installed at Exxaro’s zincor plant. Source: R Hochreiter
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 84 Examples of metallurgical processes View of Cullinan diamond recovery plant. Platinum group metals smelter at Implats. Bio-Oxidation plant at Galaxy Gold. Source: Russell & Associates
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 85 Examples of metallurgical processing Smelter – liquid metal and rock is poured from a furnace. First comes the liquid rock, then the liquid metal below. Flotation bubbles being scooped off the top – these ‘bubbles’ contain the valuable metals. Flotation cell – lots of tiny bubbles lift the metal that is wanted to the surface and overflows into troughs. View of platinum recovery plant at Marula mine (Implats). Source: R Hochreiter and Russell & Associates
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 86 Examples of metallurgical processes After crushing comes milling. A ball mill used to grind rock to powder. Carbon-in-leach tanks where gold is leached out of a pulp of mud that has gone through a mill shown above. A slimes dam – the waste product of the recovery plant. Today, most slimes are pumped back underground to support underground workings. Source: R Hochreiter and Russell & Associates
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 87 This page has been left blank intentionally.
Nedbank | Capital Part VI: The eval uation process for investment di visions The evaluation process for investment decisions
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 89 Prof M Hrebar of the Colorado School of Mines gave a brilliant discourse on the evaluation process for investment decisions at a conference hosted by Scotia McLeod in June 1997 at a Mining for Dummies conference. We think it valuable for investment managers to be aware of what work goes into a new project and how long it takes before it becomes a new mine (Prof M Hrebar). When a mineral deposit is located, a sequence of evaluation is initiated. Exploration studies and sampling (including drilling) This is used to get an initial 3-D picture of the orebody mineralisation, in terms of size, characteristics, grade, quality, etc. There are many different types of exploration, but usually follow the sequence below: Reconnaissance work This involves regional exploration, consultants’ views, geological map interpretation, purchasing an existing operation, using information from old annual reports, geological surveys, friends and others. No licence or permit is needed for this type of exploration (where the surface of the soil is not broken), but if something of interest is found and drilling, trenching or soil sampling is going to be done, then a prospecting right (in terms of South Africa’s new MPRDA or Mineral and Petroleum Resource Development Act) needs to be applied for. Like Prof Hrebar, we think it valuable for investment managers and laymen to be aware of what work goes into a new project and how long it takes before it becomes a new mine. Geological exploration Use of the geologist’s tools such as satellite imaging, geophysical surveys, geochemical surveys and plain old geology detective work now takes place. As soon as an area of potential is identified, it will have to be sampled to get an understanding of whether it is economically exciting or not. Sampling There are several steps and different methods in sampling. What method is used depends on the type of deposit:
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 90 Underground sampling  Channel sampling using hammer/drill on face, back and ribs. Only use the floor as a last resort.  Chip-channel sample is less costly but less representative.  Rock drills. 200ft long but usually only for up holes and the angle used is critical (20-30º is optimal). Low cost but problems with hole deviation and discrete cut off.  Underground diamond drill. Headroom and directional drilling.  Bulk sampling for metallurgical testing. Core drilling and analysis (underground and surface)  Solid sample at any inclination for different sizes. However, it is costly, requires directional surveying due to hole deflection.  Core analysis – Wash, box, log and slit core. It then needs assaying, geochemical and geophysical, and metallurgical testing. Careful which lab you use. Core is usually split up and sent to more than one lab.  Minimum hole-size determination. Remote sensing, hydrology and reduction through bad ground. Other drill methods  Rotary – This type of drilling method results in sludge and rock chips coming up the drill hole via the mechanical action of the drill. Cheap and fast doesn’t reveal the same level of information as a core sample does.  Reverse circulation – This type of drilling method results in rock chips coming back up the hole due to water pressure. Cheap and fast and gives better data than rotary. However samples are still small and wet conditions require special procedures.  Combinations of the above samples and drill methods are used to test the geological structure, outline of mineralisation and the quality and quantity parameters of the area. Orebody evaluation Once all the exploration has been carried out (to very strict exploration guidelines, mind you, otherwise it has just been a complete waste of time and money), the information, if it is of good-enough quality (ie boreholes have collar positions at least), is uploaded onto computers (these days), and evaluated to see if they meet those essential criteria found in the definition of a mineral resource – are there reasonable and realistic prospects for eventual economic extraction??
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 91 If there are, it can be defined as a resource, and this resource (once it has a social/ environmental/mine/process plan attached to it and is legally held by the owner and is economically viable) is then defined as a reserve. These are some of the issues that will need to be considered while evaluating the orebody…  The evaluation defines the reserves, tonnage, mining processes to use, cut-off grade and the investment decisions required.  Process estimation – consider geology (shape and trends), sampling and process considerations.  Polygons/squares/triangles (irregular deposits) – this procedure involves drilling holes at regular spaces. Then, using maths and computers, a map of the area is built in polygon/triangular/square blocks. Grades and tonnage in the different sections can give a map of the overall orebody.  Block model (massive deposits) – block size is a function of mining method and geology. Use distance weighting or kriging (geostatistics).  We use statistics to create reserve estimation. Classical statistics assumes independence of samples. Geostatistics recognises the variability in samples due to distance and direction.  Recoverable reserves – mining method, dilution, recovery, tonnage and grade and significant estimation should be considered. Methods used are geometric, cross sections, distance weighting, statistical and geostatistical.  Grade – usually 10-20% difference between estimate and actual. Inaccuracy due to sampling, assaying, evaluation and imprecision and uncertainty of methods.  Density and tonnage factor – estimate volume of ore and use a tonnage factor to convert to density. Proper tonnage calculation helps in accurate reserves estimation, equipment selection and capital and operating costs. Many economic and technical problems at operations relate to inadequate sampling of density. The objective is to forecast the grade that is sent to the mill (the head grade.)  Chip channel (vein deposits) – this traditional method samples all block faces to determine thickness and grade. Orebody separated into blocks by drifts and raises. Four points to note:  Minimum mining width – depends on mining method. Samples are adjusted to account for this. Grade decrease and tonnage will increase as width increases.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 92  Dilution – result of drilling and blasting or scaling. Samples may be adjusted or dilution may be based on average width of rock or empirical data. Dilution = 0 grade if no sample data available.  Mining recovery – the amount of ore actually mined as a function of geology and mining method. Use either engineering calculations or empirical formulae.  Cut-off grade – used to estimate the minimum grade required to produce a profit. Feasibility study and investment decision Many studies are undertaken to evaluate a project, including a desktop study, scoping study, pre-feasibility study, feasibility study, definitive feasibility study, bankable feasibility study (careful, can’t use that word in some jurisdictions) and others. Essentially, once a feasibility study is complete, you ‘rest assured’ that enough money has been spent on the deposit to know most there is to know about it (until it has been mined out).  Feasibility study is the first time a 3D picture of ore is known. Study after outline drilling, sample drilling and every year. Then the real financial manipulation can begin…  Investment decision is to maximise future wealth of shareholders. Need to know minimum return, internal rate of return, discounted cash flow-real rate of return, net present value.  Capital can be debt, equity, preferred shares, etc. Cost of capital is a function of WACC for all capital.  Mining method – rate of return – capex and opex – cut-off and tonnage – cash flow and return.  Don’t forget pre- and post- production periods in cash flow. Our contribution – cash flow analysis, the final step  The final decision depends on the rate of return required by the investor (eg mining company or private financier). If the value of the project is sufficiently high at the required rate of return, the go-ahead is given.  From here, for a mine to reach full production can take anywhere between two years (open-pit mine) to 12 years (a deep, mega-bucks mine in South Africa – the deepest mines in the world, by far).
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 93 This page has been left blank intentionally.
Nedbank | Capital
Nedbank | Capital Part VII: Fi nancial anal ysis of orebodi es Financial analysis of orebodies (Mining the stock exchanges of the world)
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 96 Mining the stock exchanges of the world The only way to value a mine is through the real DCF (discounted cash flow) method. This method does not lie, it makes the least number of estimates possible and indicates cash available after all costs, taxes and capital expenditure. It is the most honest and best estimate of value possible (earnings, price:earnings ratios, dollar per ounce in the ground, etc have no credibility whatsoever in mining company valuations. This is my conclusion after 20 years in the industry). Financial valuation of mining project X (do NOT escalate anything) – fill in the numbers for yourself and be honest! Year end 1 2 3 4 …30 Tonnes Grade Cost Capex (all) Income Working cost (all) Profit Taxable income Tax Cash flow Net present value calculation This is where you discount the cash flow that you calculated in the table above. If the life of the mine is 30 years, then your model should run for 30 years. If the mine has a life of 80 years, then your model should run for 80 years. Computers can do 80-year models, you know! That’s why we discovered computers! The rationale for making the computer do long-life cash flows is because the stock market values all available information in determining a share price. The life of mine is the most- important single piece of information available to the investor (even for a mining house (eg Anglo plc) valuation, each mine’s life should be in the valuation). The cash flows should be discounted at a range of rates from 0% to 25% real.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 97 Gold investors will accept a discount rate of 0% (in North America) and 3% in South Africa). If gold shares are discounting 5% real, they are cheap. Mining houses (investment companies that build new mines or purchase and sell mines) are generally discounted around 5%. Platinum mines are also discounted around 5%. Base metal mines tend to follow economic cycles and are riskier. Hence the market tends to hit them with a higher discount rate of around 7.5% to 10%. Very high-risk shares, like exploration companies, will be discounted by the South African market by up to 15% and even 25% in some cases. In North America and the UK, where there is an investor type with a very high-risk profile (if-one-in-20-projects-comes-off-that’s- acceptable-investment philosophy) who is prepared to lose a small percentage of his wealth, exploration and high-risk shares are bought up to an equivalent 5% level. Hence the much better rating of the Toronto and London stock markets for speculative shares. If you follow the template of the DCF calculation shown above, make your calculations for X number of years of life of mine, then discount the cash flows at the rate indicated for the mining investment given above (eg gold 3%), and you should get the best idea of the value of your project. Be honest, if the DCF is negative at 5%, walk away, find another project.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 98 Conclusion Extracting the earth’s minerals is an essential activity for humankind, and it will remain essential for many years to come as we consume more and more of the earth’s raw materials. With China, India, Russia, Brazil and South Africa climbing up the curve to become ‘sophisticated’ consumers and with a population of close on 3 billion people in this set of countries, consumption of metals and minerals will probably continue for another 20-50 years. We are still very far from being a green planet and meeting all our needs from recycled consumer products. The responsibility of the mining industry to future generations is huge. Demands from consumers for mineral products should place some of the burden for rehabilitation and environmental responsibility on consumers themselves. Unfortunately, homo sapiens (us) are not wired to give much of a damn, as long as we get our new car or house or apartment or dishwasher or… or… or. Mining companies therefore need to lead through environmental awareness and limiting the cost of extraction on the environment. The consumer is, of course, the ultimate culprit in the environmental degradation of the world and is equally in denial. It means that mining companies need to work all the harder to protect and benefit the environment, for all our sakes.
Nedbank | Capital Mining & Geology for Idiots | 5th Edition | 2011 99 Acknowledgements  Atlas Copco Mining, this company produced a wonderfully simple booklet on the main mining methods used in the industry (published in 1980).  David le Roux, fellow geologist. Thank you for assisting with constructing (from memory) the South African geological columns, while sitting in the shade of a tree on your farm in the Karoo.  Heidi Sternberg, for editing and perceptive comments.  James Allan, for his contribution on the diamond section.  Dr John Bristow, for editing and correcting some of my slightly off-the-mark facts.  Prof M Hrebar, extracts of his talk Mining for Dummies are used and acknowledged.  Minerals Deposits of South Africa, two books every South African geologist should have.  Prof Morris Viljoen and W Reimold for allowing me to use their colourful maps from their book Geological and Mining Heritage of South Africa.  Roxy Hoosen, for design and layout and hours of changing and slogging away at the drawings and text.
NEDBANK CAPITAL RESEARCH Tel +27 (0)11 295 8218 | Fax +27 (0)11 294 8218 7th Floor | Block F | 135 Rivonia Road | Sandown | 2196 P O Box 1144 | Johannesburg | 2000 www.nedbankcapitalresearch.co.za About this report This report is printed on Sappi Triple Green – a paper grade manufactured according to three environmental pillars: a minimum of 60% of the pulp used in production of this paper is sugar cane fibre, which is the material remaining after raw sugar has been extracted from sugar cane; the bleaching process is elemental chlorine-free; and the remaining pulp used in the production process comprises wood fibre which is obtained from sustainable and internationally certified afforestation, using independently audited chains of custody.

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Mining and geology for Idiots

  • 1.
    Equity|SouthAfrica|Mining Mining & geologyfor idiots (like accountants, actuaries, BA and BCom graduates, politicians, bankers, fund managers and DMR employees) . 5th Edition | 2011
  • 2.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 2
  • 3.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 3 Author René Hochreiter BSc mining geology (honours) BSc mining engineering MSc Geology Fellow of the Geological Society of South Africa Member of the South African Institute of Stockbrokers Why did I write this book? All of us live in a two-dimensional world on the surface of the earth. Yet beneath the surface of the land and sea there is another world of mineral riches, molten lava, colliding continents, faults, new growing minerals, thrusts and many more processes that have given rise to what we see in our two-dimensional world today. I, as a geologist, am always aware of why we see what we see. I want to impart that knowledge to the layman and propagate the study of the earth and its processes in a way that is easily understood and benefits the science of geology for the many. The assistance of in producing this booklet is gratefully acknowledged.
  • 4.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 4 Contents Part I: Overview................................................................................................................. 5 Overview............................................................................................................................ 5 Introduction................................................................................................................... 6 Glossary of terms.......................................................................................................... 8 Part II: Geology and genesis of SA’s main economic orebodies................................ 14 Metals and minerals exploited in South Africa............................................................. 15 The Witwatersrand system.......................................................................................... 22 The Bushveld Complex (BC)....................................................................................... 25 The Karoo system....................................................................................................... 28 The Transvaal system................................................................................................. 31 The Waterberg system................................................................................................ 32 Greenstone belts......................................................................................................... 33 Granite basement ....................................................................................................... 38 Diamonds.................................................................................................................... 40 Part III: Mineral resources and reserves ....................................................................... 44 A short (and sad) case study of why resources are important..................................... 45 Interpretation of borehole drill results.......................................................................... 47 Part IV: Mining methods and exploitation..................................................................... 52 Mining methods .......................................................................................................... 53 Part V: Metallurgical recovery and refining .................................................................. 72 Metallurgical recovery circuits ..................................................................................... 73 Refining ...................................................................................................................... 73 Part VI: The evaluation process for investment divisions........................................... 88 Exploration studies and sampling (including drilling)................................................... 89 Orebody evaluation..................................................................................................... 90 Feasibility study and investment decision ................................................................... 92 Our contribution – cash flow analysis, the final step.................................................... 92 Part VII: Financial analysis of orebodies ...................................................................... 95 Mining the stock exchanges of the world .................................................................... 96 Net present value calculation...................................................................................... 96 Conclusion.................................................................................................................. 98 Acknowledgements..................................................................................................... 99
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    edbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 5 Part I: Over view Overview
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 6 Introduction This simple reference book is published to assist fund managers and inexperienced investors in understanding the general geology, resource statements, mining methods, metallurgical circuits and cash flow statements used by South African mining companies and, as such, used to value their shares. A request by a fund manager with no mining background, who will remain anonymous, generated this work of art and of necessity. A request for numerous copies of this book, from the world’s largest mining company, which will also remain anonymous to save it embarrassment (!), has been a real eye-opener. The reference book is kept as brief and simple as possible, and consists of seven parts: Part I Overview Part II Geology and genesis of South Africa’s main economic orebodies Part III Mineral resources and reserves Part IV Mining methods and exploitation Part V Metallurgical recovery and refining Part VI The evaluation process for investment decisions Part VII Financial analysis of orebodies During your cover-to-cover read, you will come across topics such as the fakawee mining method which is used mostly to mine fubarites, made famous by South African mine managers (see glossary). This mining method, although not described in detail, runs like a golden thread through the different aspects of this book. We hope you enjoy scanning it. For some background, the earth was formed 4.6 billion years ago. Most mineral resources mined in South Africa were formed in the age range of 2.7 billion (for the Wits gold deposits) to 85 million (Kimberley diamond deposits) years ago. South Africa has some of the richest ore deposits in the world. It dominates global platinum, gold and manganese resources and is right up there with many other metal and mineral resources. The last 70 years have seen exploitation of these resources through a variety of mining methods not generally understood by the layman nor the generalist fund manager, accountant or lawyer who always seem to be involved in a mining venture. This book describes the geology, the genesis, and the mining and processing of these ore deposits as simply as possible. The following text is with deference to Prof M Hrebar of the Colorado School of Mines: “Why do we do it? All this nonsense of digging, drilling, sweating and milling. All for a little bit of something shiny and sparkly. The expense. The sweat. The planning. The headaches and heartaches. It takes billions of rands, even dollars and about 7-8 years from the initial surveys to get a mine into full operation.”
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 7 Is the geologist right? Is he a one-handed or two-handed geologist? Will the market back us? Will we get a permit from the central or local government authorities? Will it pass the black empowerment bandwagon test? Are there any environmental problems? Can we get at it? Can we get power/water/people and machines there or do we have to build our own power station, pump our own water from miles away, build our own town, road, railway, airport? Why do it? What a headache! If you are producing gold at, say, $700/oz and churning out 1 million ounces a year from your mine, and if you happen to own a few of these little babies … that’s a lot of money at the current ~$1,300/oz gold price! The cash from one mine pays for the next operation, the reclamation of the old project, and for all those lovely little dwarves, digging, drilling, sweating and milling away… hi-ho-hi-ho, it’s off to work we go. “Looking – finding – testing – evaluating – building – mining – processing – cleaning” … no wonder there are few left in the industry with nerves not shot through. No wonder the capacity for bull-gnittihs (see Digital Fortress by Dan Brown for code) naïve fund managers and accountants and lawyers and the layman is unending. So to get a slightly better handle of the most important components of a mine/mineral project… read on.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 8 Glossary of terms General terms Carat A carat is a unit of mass equal to 200mg, used for measuring gemstones and pearls cm/g.t Centimetre grams per tonne DMR Department of Mineral Resources (DMR) g/t Grams per tonne (32.151g = 1 ounce) Geology terms Au Chemical symbol for gold Craton Large stable block of undisturbed ‘plate’ of rock millions of years old Cu Chemical symbol for copper Dip The steepest part of a dipping or slanting plane Dolerite Same as granite, but formed when lava erupts and cools on earth Dyke A vertically/sub-vertically intrusive body of magma Fm Formation Genesis Creation Granite Formed when magma cools in earth Greenstone Very old rocks, the first rocks to be formed after the earth cooled Heavy mineral sands Titanium, rutile and ilmenite Igneous rocks Rocks formed deep inside the earth from magma or on surface from lava Magma Lava inside the earth Lava Magma after it has erupted from the earth Metamorphic rocks Pre-existing rocks (ie sedimentary, metamorphic and igneous) deformed by pressure and temperature My Million years Ni Chemical symbol for nickel Pd Chemical symbol for palladium Pegmatite Rock which melted and squeezed its way into pre-existing solid rocks PGMs Platinum group metals (platinum, palladium, rhodium, gold, iridium, ruthenium) Pt Chemical symbol for platinum Qte Quartzite Sb Chemical symbol for antimony Sedimentary rocks Rocks formed by the erosion of other rocks and deposition of this eroded rock in water or on land Strike The horizontal line on a slanting plane Supergroup A sequence of rocks defined by geologists to have been formed together Zn Chemical symbol for zinc Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 9 Mining terms A fatal Death in a mine Adit A horizontal tunnel entering a mine from the side of a hill Aykona No Aziko sper Finger lost through LTI (below) Cage The ‘lift’ in the shaft used for hoisting men and material CIP Carbon in pulp; carbon in a pulp solution attracts gold to the carbon Cross-cut A tunnel from the haulage to raise/winze (below) Developing (development) Blasting an excavation horizontally underground; also referred to as ‘boor-en- blaas’, a miner’s sole purpose no matter if it’s on-reef or not Fakawee Confused. Generally used in the context of ‘where the fak-ah-wee’ mining method Fubarites The name for a rock (fubar) that has been ‘fu**** up beyond all recognition’ Haulage A tunnel from shaft to cross-cut Haulage truck Large tippler truck (biggest now 500-tonne load) used to haul rock Hoisting Moving men, material and rock up and down a shaft Jou gat Your hole Jou moer You are wrong! Ledging The first ‘cut’ of reef on either side of a raise which begins the stoping process LHD Load-haul-dump vehicle LTI Lost-time injury Milling Grinding rock to powder Mining Breaking rock On-reef Where the miners are supposed to ‘boor en blaas’ as opposed to ‘off-reef”, where there is no value Raise Upwards-inclined tunnel on reef Ramp Inclined, helical tunnel used to gain depth using rubber-tyre equipment Reef The rock that contains the minerals Reef An orebody containing gold/platinum, usually thin and tabular Refining Removing the valuable part of the broken and ground-up rock Seam ‘Reef’ but used when talking about coal Shaft A vertical or inclined tunnel used for transporting men, materials and rock; the top of the shaft can be on surface or deep underground Shaft sinking Blasting an excavation vertically downwards, usually to 2,000m (or the weight of the rope becomes too great) Skip The ‘elevator’ used in the shaft to hoist rock Stoping The act of mining in a confined space Waste Any rock not containing value Winze Downwards-inclined tunnel on reef Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 10 Periodic table of elements Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 11 Alphabetical list of elements Ac Actinium Ge Germanium Pr Praseodymium Ag Silver H Hydrogen Pt Platinum Al Aluminium He Helium Pu Plutonium Am Americium Hf Hafnium Ra Radium Ar Argon Hg Mercury Rb Rubidium As Arsenic Ho Holmium Re Rhenium At Astatine I Iodine Rf Rutherfordium Au Gold In Indium Rh Rhodium B Boron Ir Iridium Rn Radon Ba Barium K Potassium Ru Ruthenium Be Beryllium Kr Krypton S Sulphur Bi Bismuth La Lanthanum Sb Antimony Bk Berkelium Li Lithium Sc Scandium Br Bromine Lr Lawrencium Se Selenium C Carbon Lu Lutetium Si Silicon Ca Calcium Md Mendelevium Sm Samarium Cd Cadmium Mg Magnesium Sn Tin Ce Cerium Mn Manganese Sr Strontium Cf Californium Mo Molybdenum Ta Tantalum Cl Chlorine N Nitrogen Tb Terbium Cm Curium Na Sodium Tc Technetium Co Cobalt Nb Niobium Te Tellurium Cr Chromium Nd Neodymium Th Thorium Cs Cesium Ne Neon Ti Titanium Cu Copper Ni Nickel Tl Thallium Dy Dysprosium No Nobelium Tm Thulium Er Erbium Np Neptunium U Uranium Es Einsteinium O Oxygen V Vanadium Eu Europium Os Osmium W Tungsten F Fluorine P Phosphorus Xe Xenon Fe Iron Pa Protactinium Y Yttrium Fm Fermium Pb Lead Yb Ytterbium Fr Francium Pd Palladium Zn Zinc Ga Gallium Po Polonium Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 12
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 13 This page has been left blank intentionally.
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    Nedbank | Capital PartII: Geol og y and g enesis of SA’s main economic orebodi es Geology and genesis of SA’s main economic orebodies
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 15 Metals and minerals exploited in South Africa Let’s begin with geology (miners often tend to skip this part!). This planet we live on may seem smooth and shiny, but underneath the surface there is super-hot liquid churning away. The earth’s plates shift, causing cracks to form, and these provide conduits for the super-hot liquid or magma to move up through the cracks. This cools and deposits the metals and minerals we are after. Pressure. Heat. Cracks. Fractures. Upsurges. Folds. Anomalous situations. That’s the pointer. Something out of the ordinary (Prof Hrebar). Geologists use various techniques to look for and find correct locations most suitable for the deposition/emplacement of minerals. Walking the land, picking up and examining rocks is still ALL necessary. But today’s techniques incorporate methods from physics, chemistry, materials technology, mathematics and computers to help geologists find their way. The starting point is rock structure. ‘Hard rock’ geology is the area of most significance. The main rock groups are igneous, sedimentary and metamorphic.  Igneous: This is when magma from the earth’s core rises and cools below the earth’s surface, or erupts in the form of a volcano and spews overland; two main types of orebodies are associated with igneous rocks.  Magmatic (layered intrusions): Ore crystallises in magma in layers: Ni, Pt, Cr, Fe, etc.  Hydrothermal: Magma heats water. Water dissolves minerals and deposits them elsewhere.  Sedimentary: Result of weathering/erosion and deposition (of any pre-existing rocks). Host to mineral aggregates, coal, sandstone, uranium, limestone, etc.  Metamorphic: Any type of rock that has changed, usually due to pressure or temperature. Affects grade, tonnage and size, but not deposit type. Igneous (rocks initially liquid) Metamorphic (folded rocks) Sedimentary (flat rocks) eg South Africa’s Bushveld Complex eg The Cape folded mountains, Himalayas and Alps eg The Karoo, Witwatersrand (gold) supergroup Four major STEPS to making minerals PAY  Geology  Mining  Metallurgy/refining  The market and selling the product Three major rock groups  Igneous  Metamorphic  Sedimentary
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 16 Genesis and uses of some of SA’s more important minerals Metal Chemical symbol Genesis Uses Antimony Sb Very similar to copper, it occurs in the geologically complex greenstone belt rocks where it finds areas of lowest stress Fire retardant Coal C Coal occurs in shallow, flat rocks which were plants and forests only a few 100 million years ago Power Copper Cu Copper occurs mainly in shattered rocks near the east side of the Pacific where the ocean floor is moving under the Americas, causing remelting and fractioning of rocks. Again (like gold) because of its low melting point, it finds its way into any breaks or shattered rock Cables, wire, motors Diamonds Dm Diamonds originate in pipe-like features called Kimberlite pipes. They also occur in rivers, beaches and shallow continental shelf deposits as erosion takes diamonds to the oceans For women (aphrodisiac) Gold Au Gold occurs mainly in sedimentary (flat rocks) deposits. It also occurs in greenstone belts (geologically complex rocks) and in shattered rocks. Gold has a low melting point and will always be first to melt and find the zone of least stress or least resistance For women (aphrodisiac) Heavy mineral sands Zr Found on beaches (or where beaches used to be millions of years ago) Paint Manganese Mn Manganese occurs in sedimentary rocks (formed in water) along with iron ore deposits Steel making Nickel Ni Nickel occurs mainly in igneous rocks (rocks from deep down in the earth) which cooled millions of years ago Stainless steel Palladium Pd Occurs in igneous rocks Cars, teeth and electronics Platinum Pt Occurs in igneous rocks For women, fast cars and fuel cells Rhodium Rh Occurs in igneous rocks Cars + cufflinks + plating white gold Ruthenium Ru Occurs in igneous rocks Fuel cells Tantalum/ Beryllium Ta/ Be Occurs in pegmatite rocks Metallurgy Uranium U Found in sedimentary rocks, i.e. coal in Karoo in SA and associated with gold in Wits Power (when used responsibly) Zinc Zn Zinc deposits occur in high-grade metamorphic zones (very altered rocks – altered by temperature and pressure.) Galvanising Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 17 Genesis and geometry of ore bodies – a pictorial illustration Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 18 Simplified geological map of South Africa Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold)
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 19 The geology of South Africa is shown on the map as the systems of rock outcrops on the surface of the region. Structurally, however, the rock systems (actually called supergroups) show large stable areas called cratons and deformed areas called mobile belts. One finds diamonds only (with one exception to the rule in Australia) in cratons and base metals in mobile belts. The diagram below shows the simplified structural framework of SA geology with cover rocks removed. Ancient cratonic nuclei and surrounding metamorphic provinces Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold)
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 20 Seven main geological systems* in Southern Africa Age (billion years) System Mineral Simple South African geological column 1 0.6 Karoo system Thermal coal, uranium 2 1.5 Waterberg system Coking coal (actually in the Karoo system) 3 2.1 Bushveld Complex PGMs 4 2.3 Transvaal system Iron ore, manganese, base metals 5 2.7 Witwatersrand system Gold, uranium 6 3.7 Greenstone belts Gold, antimony 7 4 Granite basement Copper, mica Source: R Hochreiter * Real geologists prefer the term supergroup Localities of South Africa’s major mineral deposits Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold)
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 21 Geological column of South Africa Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 22 The Witwatersrand system Arguably, South Africa’s most important geological system, the Wits basin contains the world’s largest gold resources and has been producing gold since the metal was discovered in 1886 (the basin is older than 2,700 million years). The gold-bearing reefs outcrop along the edges of the basin (Evander, Springs, Germiston, Randfontein, Carletonville, disappear until Klerksdorp, then disappear again until Welkom). They dip towards the centre of the basin. No outcrop of this basin has yet been found on the eastern side. Simplified geology of the Witwatersrand basin (younger cover rocks removed) Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold) The geological map shown above (note, covering rocks of the Wits supergroup removed) shows the West Rand group of rocks where gold mineralisation occurs. Gold deposits only occur on the north, west and south sides of the basin.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 23 The whole area was once a large inland sea with gold-rich rocks (mountains) around its edges (north, west and south). Massively violent storms around 3 billion years ago smashed up the mountains and deposited the boulders, grit, sand, mud and of course the gold into the inland sea (well, if you are a placerist, this is what you believe). Over time, the sea was buried by further eroded material and Ventersdorp lavas. It was cracked and broken up by movements in the earth’s crust, but kept its shape. Around 2 billion years ago, a massive (estimated 40km diameter) asteroid hit the basin at Vredefort (see map above) from the south-east of the basin and slammed around 100km into the earth. This could have triggered the genesis of the Bushveld Complex (see next section on geology). Hydrothermatists believe this incident melted and mobilised the gold deep within the earth’s crust. This hydrothermal fluid moved upwards and deposited the gold in the conglomerate beds where it is found today. Simplified section of the Witwatersrand basin Source: R Hochreiter and D le Roux
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 24 There are eight reefs that have been mined in various areas of South Africa at various times over the last 120 years, as well as large quantities of uranium, silver and osmiridium. The whole sequence is about 5km thick from bottom (Dominion Reef) to top (Black Reef). Witwatersrand supergroup – anyone see the impact craters? The supergroup is estimated to be between 2300-2800my making it older than the Bushveld Complex and younger than the Barberton greenstones. It is classified as Achaean in age (very very old!). Source: Mineral Deposits of Southern Africa. Modified after Brock and Pretorius, 1964, showing the location of main cities and towns around the largest goldfield in the world if cover rocks are stripped off. Genesis Violent storms in a pre-existing greenstone belt-like mountain land eroded the rocks and deposited them on the shores of a large inland sea. No oxygen existed at the time and very violent electric storms occurred, with lightning striking the iron pyrites (with which gold is associated), breaking the rocks and assisting erosion. These were ground to pebbles by storm-flooded rivers, together with the quartz and volcanic ash/lava, and deposited with the gold on shores covered in algae (algae, like carbon, attracts gold particles, almost like electroplating) which also trapped gold particles out of the highly acidic mush/water into large tidal flats, until the next storm covered the gold concentrations. This probably went on for 200 million years before the final (last) reef (the Ventersdorp Contact Reef – VCR) was laid down by very violent volcano-induced storms, which finally covered the whole sequence with thick lava, marking the end of the genesis of the world’s most-famous and biggest gold deposit. Deep burial and low-grade metamorphism resulted in today’s deep, hard gold deposits in the Witwatersrand system.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 25 The Bushveld Complex (BC) The Bushveld Complex is host to the world’s largest platinum field. Possibly initiated by the Vredefort asteroid impact, the Bushveld Complex rivals the Wits Basin as the most important (economically) geological unit in South Africa. It was emplaced about 2,000 million years ago. The occurrence of platinum reefs (marked as Pt) in the Mafic zone in the Bushveld Complex is shown below. Geological features – major mineral occurrences of the Bushveld Complex Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold) The Bushveld Complex contains 90% of the world’s platinum, palladium and rhodium resources. The two main platinum-bearing reefs are the Merensky and UG2 reefs. The whole sequence of Bushveld Complex rocks is around 8km thick.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 26 Geological column of the Bushveld Complex – main platinum-bearing reefs Source: R Hochreiter and D le Roux Genesis Two possible theories on how PGMs came into being in SA are discussed below. The classical theory is the mode of formation of the world’s greatest treasure trove of PGMs via a molten rock injection into the earth’s crust. Several injection phases occurred and the whole gambit then took 40 million years to cool (and still cooling), plenty of time for very distinct layers to form and crystallise out the platinum minerals when the chemistry was right. PGMs are found in three different lobes or limbs: the classical Western Bushveld (Rustenburg/Northam); the Eastern Bushveld (Maandagshoek/Dwarsrivier) and the ‘half lobe’, the Northern Bushveld (Mokopane), are separated into distinct areas on surface and may be connected to each other at depth, again depending on your belief. The cause of the molten rock injection could have been an asteroid impact 200km south at Vredefort.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 27 Their sequence of layers is similar, yet different. It is possible that three different vents injected lava (magma) from the same source at depth. The three different vents could have been feeder dykes as the grade of PGMs, for example, increases with depth to a maximum at 3,000m. Secondly, a theory gaining credibility is that a massive asteroid hit the earth at the site of the Bushveld Complex, smashed 100km into the earth’s surface and caused the genesis of the Bushveld, the Zimbabwean Dyke, the major faults and lineation of South Africa’s geological terrain and remelting and refreezing over a very long time. The nub of the theory is that the moon has 300,000 impact craters – the earth should have even more; platinum is 18 times heavier than water (gold only 16x, rhodium 20x, palladium 14x) – so what are all these heavy precious metals doing at the surface of earth if the earth was red-hot 4.6 billion years ago and some of the heaviest elements (rhodium and platinum) sank to the centre of the earth, 6,400km below surface. The asteroid (if this theory is true) was probably from the asteroid belt, a planet that broke apart and which may contain solid chunks of PGMs/nickel/copper and so on. Take your pick; there are several other possibilities but, for now, these two should suffice. Localities of South African meteorite impact structures ( ) The map shows the known impact craters of South Africa. Personally, I believe there are many more, but these are now covered by Karoo and younger rocks. It is possible the Vredefort asteroid impact had a cataclysmic subcontinent-wide shattering effect, which allowed the penetration of deep, heavy, liquids containing platinum group metals to come to the surface through the shattered crust and resulted in the platinum deposits we see today in the Bushveld Complex. Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold)
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 28 The Karoo system The Karoo system, other than being famous for hosting South Africa’s vast fossil wealth, is also host to all our coal deposits. These were formed when SA was still part of the larger Gondwanaland and our coalfields are related to those found in the Americas and Australia. Geological distribution of the Karoo supergroup Source: Mineral Deposits of Southern Africa – Major coalfields of Southern Africa
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 29 South Africa has 19 coalfields, with the Highveld, Witbank and Ermelo coalfields supplying most of the coal required for power in the last decade. The Karoo and Cape supergroups are primarily sedimentary sequences of rocks – the main economic value in the Karoo supergroup is in its coal. The whole sequence is probably 10-15km thick. Geological column of the Karoo and Cape supergroups Source: R Hochreiter and D le Roux
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 30 Geological map of the Karoo supergroup Source: Geological and Mining Heritage (MJ Viljoen and WU Reimold) The Karoo supergroup is widespread, the youngest rocks in South Africa and mainly sandstones, shales (mudstones) and some grits Genesis This is the youngest system, formed about 600 million years ago, and is the only one to develop in the presence of oxygen. A large inland sea was responsible for a less violent deposition of sandstones, shales, muds and coal. Life started on earth around 600 million years ago and plants, animals and other life forms proliferated, were buried and over time became fossilised or became coal. The clays exploited in this geological region are younger alteration products that formed through weathering.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 31 The Transvaal system Host to the world’s largest manganese field, this system is around 2,300 million years old. Geological column of the Transvaal supergroup Source: R Hochreiter and D. Le Roux The Transvaal supergroup contains some minerals of economic value. The whole sequence is probably 3km thick. Genesis This system started where the Witwatersrand left off. A large inland sea facilitated the formation of large deposits of dolomite (calcium/magnesium rocks) and an environment conducive to forming iron and manganese deposits (in the Northern Cape). Base metals were deposited among the dolomites of the old Transvaal area, although not to any great extent. Gases from the Bushveld Complex under the Transvaal system formed fluorite, lead and vanadium deposits in the Transvaal system.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 32 The Waterberg system The world’s largest field of nothing. This system is around 1,700 million years old. Geological column of the Waterberg system Source: R Hochreiter and D Le Roux The Waterberg system contains few minerals of economic value. The whole sequence is probably 2-3km thick. Genesis The Waterberg geological system also formed in a large inland sea but has few, if any, associated economic minerals.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 33 Greenstone belts The world’s most-interesting geology and oldest rocks on earth are to be found at Barberton in the Mpumalanga province of South Africa. These are between 3,000 to 3,600 million years old. The main greenstone belts of South Africa Source: Mineral Deposits of Southern Africa The earliest life forms (algae) were discovered in the Barberton greenstone belt. They are 3.6bn years old and were studied by NASA before Neil Armstrong went to the moon. The map above illustrates the setting of the Murchison greenstone belt relative to other greenstone belts and the younger cover rocks. The greenstone belt contains gold, antimony and smaller amounts of other minerals – very old and deformed rocks. Oldest-known life form (algae) occurs in the pillow lavas at 3.6bn years of age.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 34 Geological map of Barberton greenstone belt (New Consort, Sheba, Agnes gold mines) Source: Mineral Deposits of Southern Africa The Barberton greenstone belt – correlation to three other belts Source: R Hochreiter and D Le Roux
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 35 Geological sketch of Pietersburg greenstone belt (Eersteling goldfield) Source: Mineral Deposits of Southern Africa Geology of the Murchison greenstone belt (see mineral occurrences) Source: Mineral Deposits of Southern Africa
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 36 Genesis Greenstone belts contain the oldest rocks on earth, >3.5 billion years old. The sun is 4.5 billion years old (and will probably burn for another 5 billion years), to put the age of the earth in perspective. Greenstone belts are highly complex geological occurrences; they were probably islands of lava and volcanic debris on which volcanoes spewed out all sorts of metal. Subsequent folding, fracturing and squeezing of rocks in these islands caused gold, antimony, etc to start moving again and find their way into areas of least pressure. Hence, any arch, fault, fold nose, space (anything where there was no or little pressure) was filled with the low-melting point gold/antimony, mercury, etc. The earth, 3.5 billion years ago, was highly unstable and all sorts of minerals were spewed out from deep down and mixed in with the islands that were trying to form the first continents. The earth was probably smaller (higher gravitational constant than today’s 9.8m/s/s) and hotter, and much more prone to earthquakes and violent storms than we see today. Hence, the geological processes epitomised in today’s remnants of these early continents, ie the greenstone belts, are absolutely fascinating in their geology and the contained minerals. Below is a schematic diagram of an Archaean volcano-sedimentary complex showing the possible relation of mineralisation (gold and sulphides) to various parts of the volcanogenic model (modified after Goodwin and Ridler, 1970; Hutchinson et al, 1971; Karvinen, 1981). Schematic diagram of an Archaean volcano-sedimentary complex Source: CR Anhaeusser
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 37 A simplified structural map of the Jamestown and Sheba Hills area of the Barberton mountain land shows the positions of the more-important folds, faults and fractures in the region. Some 75% of all gold mined in the Barberton area has come from the area shown, which also has the three largest gold mines in the district. Barberton mountain land Source: CR Anhaeusser
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 38 Granite basement Host to the world’s largest diamond deposits (although they also seem to be associated with cratonic areas that have extensive outflows of basaltic lavas), these rocks are 2,500 to 4,500 million years old. The map illustrates the exposed Archaean granite-greenstone terrain of the Zimbabwe and Kaapvaal cratons in southern Africa. The cratonic areas are enveloped by high-grade metamorphic belts and were intruded during the Proterozoic era by the Great Dyke in Zimbabwe and the Bushveld Complex in South Africa (after Anhaeusser, 1976a, b). The granite basement rocks of southern Africa Source: Mineral Deposits of Southern Africa
  • 39.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 39 Distribution of granite basement rocks in southern Africa and the greenstone belts Source: R Hochreiter and D Le Roux Genesis Generally, the granites have few minerals of economic value in South Africa (other than some esoteric minerals such as tantalite, beryl, lepidolite (lithium mineral), emeralds, sapphires, mica, etc). In Limpopo Province, mica is mined at a town called Mica, near Phalaborwa. In Zimbabwe, near a town called Bikita, Bikita Minerals mines a pegmatite (a remelted granite due to some disturbance in the crust containing rare minerals and elements) for lepodilite (lithium). In the Filabusi area, beryl, a type of emerald, and emeralds themselves are mined from a highly metamorphic granite/greenstone contact.
  • 40.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 40 Diamonds Diamonds are formed deep in the earth if there is elemental carbon present. The diagram below shows the depth (150-300km) where carbon becomes diamond as a stable form at very high pressures. On surface, where there is no pressure, carbon’s stable form is coal. For diamonds to remain in diamond form, they must be brought up to surface at very high speed with an instantaneous drop of pressure and rapid cooling. If this does not happen (ie pressure drops slowly and temperatures remain high), the diamonds ‘burn’ and become CO2 gas, or frizzle into nothing. Hence, for a diamond to come to surface, there must be a volcano which ensures zero pressure and low temperatures. That is why so many kimberlites are barren of diamonds. Kimberlites are rocks that invariably host diamonds and have been brought to surface from the deep lithosphere. Where diamonds are formed Source: Elkedra NL
  • 41.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 41 Kimberlites The volcano that transports diamonds from deep below the earth’s surface finds its way to surface through deep cracks and fissures called dykes. On reaching the surface, the volcano erupts, often leaving behind a carrot-shaped body of magma, known as a diatreme. The diatreme is topped by a pyroclastic tuff (a real mish- mash of rocks), which is the detritus from the explosion that falls back to earth. The ‘pipe’ left behind containing volcanic rock, mantle fragments, others minerals and, rarely, diamonds is called a kimberlite, after the town in South Africa where these pipes were first discovered in the 1870s. The other rock type that hosts diamonds is called a lamproite. Generally, kimberlites are found in clusters with up to 100 sometimes found close to each other. However, not all tend to be of the same age and even within a single occurrence, several different volcanic events over different times may be present, adding to the complexity of sampling and proving the economic potential of the orebody (a kimberlite’s neighbour generally doesn’t tell one anything about its grade or age). Ages of southern African kimberlites Million years Examples Country 65-85 Kimberley group 1 pipes and dykes RSA Orapa and Tswabong clusters Botswana 115-205 Finsch, Swartruggens, Dullstroom RSA Group 2 pipes and dykes Swaziland 240 Twaneng cluster Botswana 550-600 Venetia and River Ranch RSA Kimberlites Zimbabwe 1,200 Cullinan cluster (Premier Mine) RSA Martins Drift cluster Botswana 1,700 Kuruman kimberlites RSA >2,700 Wits supergroup RSA Source: J Bristow Morphology of a kimberlite pipe Source: J Bristow
  • 42.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 42 Alluvial diamonds More than 70% of mined diamonds come from primary sources – kimberlites and sometimes lamproites. Over long periods, however, most kimberlites have been eroded – some by one or two kilometres – with the contained diamonds liberated and transported by glacial movement, water and wind to find their way into rivers, and ultimately the ocean. Mining alluvial gravels produced all the world’s diamonds until the discovery of the Kimberley kimberlite field in the 1870s. Distribution of South African alluvial diamond deposits Source: Redrawn from the Mineral Resources of South Africa
  • 43.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 43 Open-pit mining for alluvial diamonds Tonnes (sometimes over hundreds of tonnes) of rock have to be moved to get down to the bedrock (old river beds) where diamonds are located. A small pit (70m deep) just to sample diamonds (in an attempt to estimate a resource). Soil and sand being moved almost to the horizon Source: R Hochreiter
  • 44.
    Nedbank | Capital PartIII: Mineral r esources and r eser ves Mineral resources and reserves
  • 45.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 45 “I know that most men, including those at ease with problems of the greatest complexity, can seldom accept the simplest and most obvious truth if it be such as would oblige them to admit the falsity of conclusions which they have proudly thought to others…” Count Leo Nicolaivithch Tolstoy A short (and sad) case study of why resources are important  In mid-1995, an unknown Canadian exploration company announced a gold find in Indonesia. On the basis of a single borehole and sampling over one week, the geologist claimed and estimated “geologic potential” of… 8 million ounces (Moz) of gold (a sizable deposit!).  Within months, the ‘measured, indicated and inferred resource’ was 2.6Moz and the ‘total resource’ was 20Moz, with analysts stating that “to calculate a resource based on a few cross-sections is a speculative exercise”; however the market capitalisation of the share rose from $100m to $2bn (measured+ indicated + inferred and total resource should be one and the same).  July 1996, with four borehole samples, the “total resource is a massive 47Moz”. The share’s market capitalisation rose to $4.2bn.  February 1997, the ‘total resource’ is 71Moz. Market capitalisation of $5bn.  April 1997, there is no gold resource. Probably less than 20 ounces of alluvial gold and cheap jewellery had been purchased to ‘salt’ the drill samples. Bre-X goes into liquidation shortly thereafter. The geologist mysteriously falls out of the plane somewhere over the forests, never to be seen again. This and numerous other mining scandals over the years have forced regulatory and professional bodies to set strict definitions of resources and reserves that must be used by mining and exploration companies in reporting. These codes (JORC – Australia, SAMREC – South Africa, CIM standards – Canada, IMMM reporting code – UK and SME reporting guide – USA) set out the following definitions:  a mineral resource is a concentration of naturally-occurring material in or on the earth’s crust that is of economic interest due to its potentially profitable extraction.  a mineral reserve is the portion of the mineral resource, including dilution of waste material that would occur in the mining process, which can be economically mined at current price, cost and regulatory conditions.
  • 46.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 46 As geological information increases, mineral resources can be subdivided into the following categories (with geologists’ terminology shown in italics):  Inferred (ie thumbsuck) – the resource is assumed from projections of geological information. Mining stock promoters like to use this classification!  Indicated (ie connect the dots) – resource tonnage, grade and quality are estimated with reasonable confidence from exploration, but at sampling intervals that are too wide to confirm the resource continuity.  Measured (ie very sure, sort of) – resource tonnage, grade and quality can be estimated with a high level of confidence. Likewise, mineral reserves are split into the following:  Probable reserves (ie connect the profitable dots) – the economically mineable part of the indicated and measured resources.  Proven reserve (ie there is so much information at this stage that even a geologist will use the term!) – the economically mineable part of a measured resource. Relationship between mineral resources and mineral reserves Source: SAMREC It is important to understand that the grade of the resource is that measured in-situ. To be classified as a reserve, the in-situ ore grade must be sufficiently high to be mined at a profit, including all waste material that would be extracted along with the ore-bearing rock. Reserves and resources are dynamic and can increase or decrease with time and information. Mineral resource estimates are not precise and depend on the amount of geological information available. Reserves will vary depending on mostly external factors, such as long-term commodity price trends, that would determine whether further resources become profitable to mine or whether previously determined reserves are no longer profitable. Exchange rates and costs (capex and opex) also impact on these categories.
  • 47.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 47 Interpretation of borehole drill results Let us consider a set of drilling intersections. A very conservative geologist’s interpretation.
  • 48.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 48 A conservative geologist’s interpretation. An optimistic geologist’s interpretation.
  • 49.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 49 A very optimistic geologist’s interpretation. An extremely optimistic geologist’s interpretation.
  • 50.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 50 A geophysicist’s interpretation. The mining engineer’s interpretation, used to bluff fund managers, accountants, BEEs, etc. Source: Prof M Hrebar
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  • 52.
    Nedbank | Capital PartIV: Mini ng methods and exploi tati on Mining methods and exploitation
  • 53.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 53 Mining methods Mining and exploitation of mineral deposits is an exercise in THREE-dimensional geometry. Many people have difficulty thinking in THREE dimensions (never mind FOUR dimensions!), because we live in a TWO-dimensional world. Most inhabitants of planet earth have a ONE-dimensional thought process as evidenced by the human breeding programme that has led to the current state of global over-population! All orebodies have some three-dimensional shape. The trick is how to get tunnels (access) into and around them to get the valuable portion (the ore of the orebody) back to the surface, if it’s not already on surface, and into an extraction plant. Orebodies come in ANY shape or size; from ball shaped, to pear shaped, from balloon shaped to rod shaped, from flat shaped to curve shaped – the one-dimensional thought process shows clearly! Mostly what miners think about every 30 seconds on average is breast stoping, the most-common mining method in South Africa. Exploiting these shapes is fairly easy when the orebody is of high quality, money is no obstacle and bodies are available to do the mining. Problems arise when the orebody is not that attractive and profitability is marginal. Ingenious methods of access then need to be employed, with the help of, where possible, new technology. Whatever the shape of the orebody, a shaft needs to be sunk into the orebody, usually with long lead times. Access to the orebody from the shaft is via drives, haulages and cross- cuts (tunnels). Finally, the valuable part of the orebody is exploited using different mining methods that are described in the following pages. Read on.
  • 54.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 54 Underground mining Study the next two diagrams carefully. These are the two main methods used in South African underground mining (nearly all SA gold and platinum mines use this method). Thin tabular reef type Description of method: Panels are blasted daily in the direction shown. The blasted ore is scraped down to the next gully and then scraped to a centre gully from where it is scraped into ore passes. The ore passes lead to loading ‘boxes’ that disgorge the ore into small trains which carry ore to the shaft ore passes. These lead to the shaft bottom from where ore is hoisted to the surface. Application: Thin, tabular reef mining of widths of 0.8-1.5m. Advantages: Few, but no new alternatives yet to the labour - intensiveness of this method. Disadvantages: Narrow, hot, uncomfortable, very labour- intensive, can’t really use machines. Dangerous working conditions. Mines: Most SA Wits gold mines. Source: R Hochreiter
  • 55.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 55 ‘Massive’ orebody type Description of method: Holes are drilled in ‘fans’ in the orebody. These fans are blasted in slices. The ore is loaded by LHD and transported to the ore passes where it gravitates down to the bottom of the shaft. From there it is loaded into skips which hoist ore to the surface. Application: Large, vertical massive, rounded orebodies. Advantages: Low-cost, no fill required, can be highly mechanised. Disadvantages: Safety – LHDs and workers are exposed to rock falls. Mines: Palabora. Source: R Hochreiter
  • 56.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 56 Shrinkage Description of method: Holes are drilled in fans in the orebody. These fans are blasted in slices. Holes are drilled in the solid rock above the broken rock. After blasting, enough broken rock is drawn out of the bottom cross-cuts to allow space for the next holes to be drilled and blasted. Rock drawn out of the bottom drawpoints is taken to surface. Application: Only a certain amount of broken rock is drawn out of the bottom of the stope to allow drilling crews to drill and blast the next slice above their heads. Advantages: Low-cost, no fill required. Safe mining method, relatively speaking. Disadvantages: Ore tied up until stope totally drilled out and blasted. Mine: Barberton, Galaxy Gold Mine, Pan African Resources, Vantage Gold. Source: Atlas Copco Handbook
  • 57.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 57 Sub-level stoping Description of method: Tunnels are developed in the orebody. From these tunnels, a series of ring holes are drilled and blasted. The broken ore falls to the drawpoints and is taken out to surface. Application: Rock (ore) is blasted into an open space and collected by machines at the cleaning level. Advantages: Safe, remote blasting. Disadvantages: Dilution control is difficult. Mine: Consolidated Murchison. Source: Atlas Copco Handbook
  • 58.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 58 Sub-level caving Description of method: Tunnels are developed in the orebody. Holes are drilled vertically upwards and blasted. Using trucks and LHDs, the ore is transported to ore passes where it gravitates to the bottom of the mine shaft and is hoisted out to surface. Application: This method is used when the rock does not break by itself, for example at Palabora, where the undercut area is large enough to break under its own weight. Advantages: Highly mechanised, safe. Disadvantages: High-cost, dilution control difficult. Mine: Kiruna mine in Finland Source: R Hochreiter modified after Atlas Copco Handbook
  • 59.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 59 Cut-and-fill Description of method: Holes are drilled and blasted on the top level. The broken rock is channelled down through the ore passes to the transport drift and taken to surface via shafts. Application: This is the main mining method used in the Sudbury nickel-mining area, but not used much in South Africa. The great advantage of this method is that the orebody can be mined out accurately without much waste material diluting the ore. It is also safer filling a cavity underground than leaving it open with all the concomitant safety problems of things falling on people or machinery. Advantages: Low dilution, good safety. Disadvantages: Expensive as concrete is used to fill mined-out areas. Mines: Barberton/Norilsk, Stillwater, Inco/Falconbridge. Source: Atlas Copco Handbook
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 60 Block caving Description of method: The ore ‘hanging’ above the slot, which is blasted above the draw-bells (finger raises), breaks up under its own weight and falls into the draw-bells. This ore breaks up further with secondary blasting if necessary, and is transported to underground crushers from the loading level. Application: Palabora, where the orebody breaks due to gravitational forces being sufficient to fracture rock. Advantages: Very cheap, no explosives needed in primary breaking. Disadvantages: Large rocks can block drawpoints as has happened in Palabora, delaying full production (by almost two years!) Mines: Palabora. Source: Atlas Copco Handbook
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 61 Longhole stoping Description of method: Holes are drilled from tunnels alongside the orebody (tunnels can be inside the orebody and holes are drilled down parallel to the ore) and blasted. Small loading cross-cuts from the tunnels are used to load ore and transport it to the nearest ore pass. From the ore passes, it is loaded into hoists in the shafts which take the ore to surface. Application: Holes are drilled inside the orebody on dip. Ore is blasted and collected on the level below by an LHD vehicle. Advantages: Large tonnage generator. Lower-cost than cut- and-fill. Disadvantages: Dilution more difficult to control; accurate drilling necessary. Mines: Stillwater, Limpopo Platinum. Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 62 Breast stoping Description of method: Holes are drilled as shown (in the direction of advance) and blasted sequentially into the strike gully. Scrapers then pull the remaining broken ore into the strike gullies, where other scrapers pull ore into a centre gully; from there the centre gully scraper pulls ore into ore passes. Note how inefficient this all is. Application: Breast stoping is used extensively in narrow tabular orebodies. Hence, panels are blasted sequentially more or less in the direction of strike while cleaning is done via scrapers. Advantages: Flexible at shallow depths (<1,000m). Disadvantages: High-cost, dangerous at +1,500m depth due to high induced rock pressures, inefficient, highly labour-intensive. Mines: Beatrix, Harmony, Driefontein, Implats, AngloPlat. Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 63 Longwall stoping Description of method: A long, long length of face (hence the name) is drilled and blasted. Broken ore is scraped down to the transport gully and scraped back to the centre gully ore passes. From there, ore is transported via tunnels and shafts to surface. Application: Useful in high- stress (deep) thin tabular orebodies such as SA gold mines. Advantages: Best for destressing underlying tunnels. Disadvantages: Very high cost, stress-induced rock falls and pressure bursts can occur if not carefully controlled. Mines: Western Deeps, Vaal Reefs, AngloPlats. Source: Atlas Copco Handbook
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 64 Bord-and-pillar Description of method: Holes are drilled and blasted in such a way to leave pillars in the ore at regular intervals. Using a scraper or LHD vehicle, broken ore is moved to transport drifts and sent to surface via shafts. Application: Used in low stree (shallow) thick tabular orebodies such as coal mines or platinum mines with thick reefs. Advantages: Highly mechanised, very low cost, very efficient, very safe. Disadvantages: Many LHD vehicles need skilled labour for maintenance. Difficult to remove pillars after the area is mined out – low extraction rates. Mines: Kroondal, AngloPlats, most underground South African coal/manganese mines. Source: Atlas Copco Handbook
  • 65.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 65 Up-dip (and down-dip) stoping Description of method: Holes are drilled in an up-dip direction and blasted. Broken rock is scraped to gullies, down to the ore passes and out to surface. Down-dip stoping is the reverse of up-dip stoping, ie in down-dip stoping, the face is pushed in a down-dip direction, the opposite direction to the diagram. Application: Used in shallow, thin tabular orebodies. Advantages: Most-effective method of mining shallow tabular reefs. Disadvantages: Development and stope preparation more costly than breast or longwall stoping. Mines: Lonrho Platinum and AngloPlats. Source: R Hochreiter
  • 66.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 66 Surface mining The two main methods used in South African surface mining are shown on the next two diagrams (nearly all South African coal mines use this method). Open-pit mining Description of method: Vast benches of ore are drilled, blasted, loaded on gigantic trucks and transported to surface. This is a schematic of the massive Palabora pit over 1km deep, 5km across and 11km to drive to the bottom of the pit. Application: Two new shafts go down vertically next to the pit to access the new underground mine which is mined using the block-caving method, 500m below the bottom of the pit. Advantages: Cheaper than underground mining. Disadvantages: Large amounts of waste generally need to be mined in getting to the ore. Mines: North American Palladium, AngloPlats, Palabora. Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 67 Opencast (strip mining) Description of method: Most South African coal mines, if less than 80m deep, use massive machines called draglines which strip large tracts of countryside to expose the coal bed underneath. Application: Large, shallow (less than 80m), thick orebodies, extremely well-suited to shallow coal seams in the eastern part of South Africa. Advantages: Very cheap. Disadvantages: High capital cost; if a dragline (very large automated shovel) which has a bucket (as large as a medium- sized swimming pool) capsizes, you can imagine the consequences! Mines: All large opencast coal mines in SA. Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 68 Examples of underground mining methods Drilling at face in a stope, after which explosives are placed in the hole, the face blasted and broken rock removed from the stope. Broken ore is transported underground using a load haul dump vehicle (LHD). Ore is hoisted up the shaft and transported to the metallurgical plant. Source: Russell & Associates
  • 69.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 69 Examples of open-pit mining Operations at an open-pit mine with drilled holes ready for blasting. The orebody is blasted using, at times, thousands of kilograms of explosives. Broken ore is loaded using large shovels and trucks and transported to the metallurgical plant. Source: Metorex, Chromex and R Hochreiter
  • 70.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 70 Mining in shallow water Diamonds and heavy mineral sands are recovered through mining methods in shallow water (up to 15 metres in depth). Description of method: Large floating dredges suck up vast quantities of sand from man- made ‘ponds’. These are sent through a plant on the dredge that extracts diamond or titanium, ilmenite and rutile (heavy mineral sands) and the rest is dumped overboard. Application: Sucking up gravels by vacuum machines on the continental shelf off the west coast of South Africa to recover diamonds transported to the sea by the Orange River and others that changed course over many millions of years. Crawler vehicles or man-held vacuum pipes are lowered to the seabed and gravels are systematically sucked up, with barren gravels pumped back overboard. Advantages: No real alternative to this method. Disadvantages: Expensive, at the mercy of bad weather, environmentally devastating. Mines: Diamond mining on ‘drowned’ beaches off the west coast of South Africa. Dredging sands for titanium and heavy mineral sands in St Lucia and the Cape west coast. Seabed crawler – used in recovering diamonds from the floor of the seabed Source: MMP
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  • 72.
    Nedbank | Capital PartV: M etallurgical r ecover y and refi ning Metallurgical recovery and refining
  • 73.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 73 Metallurgical recovery circuits Ore from the mine is transported to a central ‘factory’ or processing plant where the valuable part of the ore is removed. Usually, the valuable part of the ore is in very low concentrate, ie in parts per million. For example, a grade of gold from a gold mine may be around 5 grams per tonne (5g/t). This is equivalent to five parts per million (5ppm). Alluvial diamond mining is usually carried out at grades of 0.5 carats per 100 tonnes (cpht). This valuable 5ppm is what the metallurgical circuit attempts to remove. I say attempt, because very often metallurgists will throw away a large portion of the hard-won valuable content of the ore and blame it on the miner underground for mining waste (and vice versa)!. The battle between miner and metallurgist continues even today. It has however created opportunities for those willing to reprocess ‘waste’ mine dumps, an exercise easily evident in and around Johannesburg (these dumps run at grades of ~0.3g/t, and are still economically viable to some). Essentially, in a metallurgical plant, the ore is crushed, ground down to much less than 1mm in diameter then thrown in a tank with chemicals that extract the valuable part. This is called the concentrate. Refining Refining the concentrate takes place through hot (melting the concentrate) or cold (electric or electrolysis) methods of treating the melted material. Many different types of circuits exist. A few of these have been selected and some typical metallurgical circuits are shown in the next few pages:  Antimony  Heavy minerals  Coal  Platinum and PGMs  Copper  Zinc/lead  Diamonds  Zinc  Gold
  • 74.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 74 Antimony Antimony recovery plants are finicky and temperamental! The antimony refinery uses heat treatment and chemical means to upgrade it to saleable product. Gold is a by-product of antimony mining in South Africa (eg Cons Murch) Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 75 Coal Wash it and sell – that’s what you get for $90/tonne of coal. Source: R Hochreiter
  • 76.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 76 Copper Copper recovery plants always remind me of a ‘factory’, they are so huge. The copper recovery circuit (shown here is a schematic of the huge Palabora plant) is relatively simple, but needs to be able to process large volumes of ore and concentrate. Source: R Hochreiter
  • 77.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 77 Diamond circuit Breathtakingly simple plant. Sometimes, actually quite often, grease tables recover very few diamonds and most are in tailing dumps all around South Africa. Source: R Hochreiter
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 78 Gold The gold recovery circuit is blindingly simple. The furnace is small (1m diameter) and the bars are poured straight out of the furnace and sold to Rand Refinery. Source: R Hochreiter
  • 79.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 79 Heavy minerals Incredibly complicated and finicky plants – I will not even try to explain! Source: R Hochreiter Platinum and PGMs
  • 80.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 80 Recovery of PGMs is simple, except at the refinery level. The precious metals refinery (PMR) resembles a gigantic chemistry set with colourful tubes of glass. The main methods used in the PMR are either solvent extraction or ion exchange liquid methods, both involve flowing in a counter-flow direction and metals jumping from one liquid to the other. Source: R Hochreiter
  • 81.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 81 Actual metallurgical process at Zimplats (platinum) The Zimplats process is a good, simple, example of a concentrator plant. Essentially it comprises milling, three-stage floating and thickening. The concentrate is bagged and transported to a smelter. Source: R Hochreiter
  • 82.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 82 Actual metallurgical process at Zimplats (platinum) cont’d Zimplats smelter and converter plant is an industry standard. Essentially the concentrate is dried, fed into the smelter, poured into a ladle, transferred to a converter (where oxygen is blown through the matte to eradicate the sulphur) and then poured into ingots. Source: R Hochreiter
  • 83.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 83 Zinc circuit Straightforward base metal recovery plant as installed at Exxaro’s zincor plant. Source: R Hochreiter
  • 84.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 84 Examples of metallurgical processes View of Cullinan diamond recovery plant. Platinum group metals smelter at Implats. Bio-Oxidation plant at Galaxy Gold. Source: Russell & Associates
  • 85.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 85 Examples of metallurgical processing Smelter – liquid metal and rock is poured from a furnace. First comes the liquid rock, then the liquid metal below. Flotation bubbles being scooped off the top – these ‘bubbles’ contain the valuable metals. Flotation cell – lots of tiny bubbles lift the metal that is wanted to the surface and overflows into troughs. View of platinum recovery plant at Marula mine (Implats). Source: R Hochreiter and Russell & Associates
  • 86.
    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 86 Examples of metallurgical processes After crushing comes milling. A ball mill used to grind rock to powder. Carbon-in-leach tanks where gold is leached out of a pulp of mud that has gone through a mill shown above. A slimes dam – the waste product of the recovery plant. Today, most slimes are pumped back underground to support underground workings. Source: R Hochreiter and Russell & Associates
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 87 This page has been left blank intentionally.
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    Nedbank | Capital PartVI: The eval uation process for investment di visions The evaluation process for investment decisions
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 89 Prof M Hrebar of the Colorado School of Mines gave a brilliant discourse on the evaluation process for investment decisions at a conference hosted by Scotia McLeod in June 1997 at a Mining for Dummies conference. We think it valuable for investment managers to be aware of what work goes into a new project and how long it takes before it becomes a new mine (Prof M Hrebar). When a mineral deposit is located, a sequence of evaluation is initiated. Exploration studies and sampling (including drilling) This is used to get an initial 3-D picture of the orebody mineralisation, in terms of size, characteristics, grade, quality, etc. There are many different types of exploration, but usually follow the sequence below: Reconnaissance work This involves regional exploration, consultants’ views, geological map interpretation, purchasing an existing operation, using information from old annual reports, geological surveys, friends and others. No licence or permit is needed for this type of exploration (where the surface of the soil is not broken), but if something of interest is found and drilling, trenching or soil sampling is going to be done, then a prospecting right (in terms of South Africa’s new MPRDA or Mineral and Petroleum Resource Development Act) needs to be applied for. Like Prof Hrebar, we think it valuable for investment managers and laymen to be aware of what work goes into a new project and how long it takes before it becomes a new mine. Geological exploration Use of the geologist’s tools such as satellite imaging, geophysical surveys, geochemical surveys and plain old geology detective work now takes place. As soon as an area of potential is identified, it will have to be sampled to get an understanding of whether it is economically exciting or not. Sampling There are several steps and different methods in sampling. What method is used depends on the type of deposit:
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 90 Underground sampling  Channel sampling using hammer/drill on face, back and ribs. Only use the floor as a last resort.  Chip-channel sample is less costly but less representative.  Rock drills. 200ft long but usually only for up holes and the angle used is critical (20-30º is optimal). Low cost but problems with hole deviation and discrete cut off.  Underground diamond drill. Headroom and directional drilling.  Bulk sampling for metallurgical testing. Core drilling and analysis (underground and surface)  Solid sample at any inclination for different sizes. However, it is costly, requires directional surveying due to hole deflection.  Core analysis – Wash, box, log and slit core. It then needs assaying, geochemical and geophysical, and metallurgical testing. Careful which lab you use. Core is usually split up and sent to more than one lab.  Minimum hole-size determination. Remote sensing, hydrology and reduction through bad ground. Other drill methods  Rotary – This type of drilling method results in sludge and rock chips coming up the drill hole via the mechanical action of the drill. Cheap and fast doesn’t reveal the same level of information as a core sample does.  Reverse circulation – This type of drilling method results in rock chips coming back up the hole due to water pressure. Cheap and fast and gives better data than rotary. However samples are still small and wet conditions require special procedures.  Combinations of the above samples and drill methods are used to test the geological structure, outline of mineralisation and the quality and quantity parameters of the area. Orebody evaluation Once all the exploration has been carried out (to very strict exploration guidelines, mind you, otherwise it has just been a complete waste of time and money), the information, if it is of good-enough quality (ie boreholes have collar positions at least), is uploaded onto computers (these days), and evaluated to see if they meet those essential criteria found in the definition of a mineral resource – are there reasonable and realistic prospects for eventual economic extraction??
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 91 If there are, it can be defined as a resource, and this resource (once it has a social/ environmental/mine/process plan attached to it and is legally held by the owner and is economically viable) is then defined as a reserve. These are some of the issues that will need to be considered while evaluating the orebody…  The evaluation defines the reserves, tonnage, mining processes to use, cut-off grade and the investment decisions required.  Process estimation – consider geology (shape and trends), sampling and process considerations.  Polygons/squares/triangles (irregular deposits) – this procedure involves drilling holes at regular spaces. Then, using maths and computers, a map of the area is built in polygon/triangular/square blocks. Grades and tonnage in the different sections can give a map of the overall orebody.  Block model (massive deposits) – block size is a function of mining method and geology. Use distance weighting or kriging (geostatistics).  We use statistics to create reserve estimation. Classical statistics assumes independence of samples. Geostatistics recognises the variability in samples due to distance and direction.  Recoverable reserves – mining method, dilution, recovery, tonnage and grade and significant estimation should be considered. Methods used are geometric, cross sections, distance weighting, statistical and geostatistical.  Grade – usually 10-20% difference between estimate and actual. Inaccuracy due to sampling, assaying, evaluation and imprecision and uncertainty of methods.  Density and tonnage factor – estimate volume of ore and use a tonnage factor to convert to density. Proper tonnage calculation helps in accurate reserves estimation, equipment selection and capital and operating costs. Many economic and technical problems at operations relate to inadequate sampling of density. The objective is to forecast the grade that is sent to the mill (the head grade.)  Chip channel (vein deposits) – this traditional method samples all block faces to determine thickness and grade. Orebody separated into blocks by drifts and raises. Four points to note:  Minimum mining width – depends on mining method. Samples are adjusted to account for this. Grade decrease and tonnage will increase as width increases.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 92  Dilution – result of drilling and blasting or scaling. Samples may be adjusted or dilution may be based on average width of rock or empirical data. Dilution = 0 grade if no sample data available.  Mining recovery – the amount of ore actually mined as a function of geology and mining method. Use either engineering calculations or empirical formulae.  Cut-off grade – used to estimate the minimum grade required to produce a profit. Feasibility study and investment decision Many studies are undertaken to evaluate a project, including a desktop study, scoping study, pre-feasibility study, feasibility study, definitive feasibility study, bankable feasibility study (careful, can’t use that word in some jurisdictions) and others. Essentially, once a feasibility study is complete, you ‘rest assured’ that enough money has been spent on the deposit to know most there is to know about it (until it has been mined out).  Feasibility study is the first time a 3D picture of ore is known. Study after outline drilling, sample drilling and every year. Then the real financial manipulation can begin…  Investment decision is to maximise future wealth of shareholders. Need to know minimum return, internal rate of return, discounted cash flow-real rate of return, net present value.  Capital can be debt, equity, preferred shares, etc. Cost of capital is a function of WACC for all capital.  Mining method – rate of return – capex and opex – cut-off and tonnage – cash flow and return.  Don’t forget pre- and post- production periods in cash flow. Our contribution – cash flow analysis, the final step  The final decision depends on the rate of return required by the investor (eg mining company or private financier). If the value of the project is sufficiently high at the required rate of return, the go-ahead is given.  From here, for a mine to reach full production can take anywhere between two years (open-pit mine) to 12 years (a deep, mega-bucks mine in South Africa – the deepest mines in the world, by far).
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 93 This page has been left blank intentionally.
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    Nedbank | Capital PartVII: Fi nancial anal ysis of orebodi es Financial analysis of orebodies (Mining the stock exchanges of the world)
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 96 Mining the stock exchanges of the world The only way to value a mine is through the real DCF (discounted cash flow) method. This method does not lie, it makes the least number of estimates possible and indicates cash available after all costs, taxes and capital expenditure. It is the most honest and best estimate of value possible (earnings, price:earnings ratios, dollar per ounce in the ground, etc have no credibility whatsoever in mining company valuations. This is my conclusion after 20 years in the industry). Financial valuation of mining project X (do NOT escalate anything) – fill in the numbers for yourself and be honest! Year end 1 2 3 4 …30 Tonnes Grade Cost Capex (all) Income Working cost (all) Profit Taxable income Tax Cash flow Net present value calculation This is where you discount the cash flow that you calculated in the table above. If the life of the mine is 30 years, then your model should run for 30 years. If the mine has a life of 80 years, then your model should run for 80 years. Computers can do 80-year models, you know! That’s why we discovered computers! The rationale for making the computer do long-life cash flows is because the stock market values all available information in determining a share price. The life of mine is the most- important single piece of information available to the investor (even for a mining house (eg Anglo plc) valuation, each mine’s life should be in the valuation). The cash flows should be discounted at a range of rates from 0% to 25% real.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 97 Gold investors will accept a discount rate of 0% (in North America) and 3% in South Africa). If gold shares are discounting 5% real, they are cheap. Mining houses (investment companies that build new mines or purchase and sell mines) are generally discounted around 5%. Platinum mines are also discounted around 5%. Base metal mines tend to follow economic cycles and are riskier. Hence the market tends to hit them with a higher discount rate of around 7.5% to 10%. Very high-risk shares, like exploration companies, will be discounted by the South African market by up to 15% and even 25% in some cases. In North America and the UK, where there is an investor type with a very high-risk profile (if-one-in-20-projects-comes-off-that’s- acceptable-investment philosophy) who is prepared to lose a small percentage of his wealth, exploration and high-risk shares are bought up to an equivalent 5% level. Hence the much better rating of the Toronto and London stock markets for speculative shares. If you follow the template of the DCF calculation shown above, make your calculations for X number of years of life of mine, then discount the cash flows at the rate indicated for the mining investment given above (eg gold 3%), and you should get the best idea of the value of your project. Be honest, if the DCF is negative at 5%, walk away, find another project.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 98 Conclusion Extracting the earth’s minerals is an essential activity for humankind, and it will remain essential for many years to come as we consume more and more of the earth’s raw materials. With China, India, Russia, Brazil and South Africa climbing up the curve to become ‘sophisticated’ consumers and with a population of close on 3 billion people in this set of countries, consumption of metals and minerals will probably continue for another 20-50 years. We are still very far from being a green planet and meeting all our needs from recycled consumer products. The responsibility of the mining industry to future generations is huge. Demands from consumers for mineral products should place some of the burden for rehabilitation and environmental responsibility on consumers themselves. Unfortunately, homo sapiens (us) are not wired to give much of a damn, as long as we get our new car or house or apartment or dishwasher or… or… or. Mining companies therefore need to lead through environmental awareness and limiting the cost of extraction on the environment. The consumer is, of course, the ultimate culprit in the environmental degradation of the world and is equally in denial. It means that mining companies need to work all the harder to protect and benefit the environment, for all our sakes.
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    Nedbank | Capital Mining& Geology for Idiots | 5th Edition | 2011 99 Acknowledgements  Atlas Copco Mining, this company produced a wonderfully simple booklet on the main mining methods used in the industry (published in 1980).  David le Roux, fellow geologist. Thank you for assisting with constructing (from memory) the South African geological columns, while sitting in the shade of a tree on your farm in the Karoo.  Heidi Sternberg, for editing and perceptive comments.  James Allan, for his contribution on the diamond section.  Dr John Bristow, for editing and correcting some of my slightly off-the-mark facts.  Prof M Hrebar, extracts of his talk Mining for Dummies are used and acknowledged.  Minerals Deposits of South Africa, two books every South African geologist should have.  Prof Morris Viljoen and W Reimold for allowing me to use their colourful maps from their book Geological and Mining Heritage of South Africa.  Roxy Hoosen, for design and layout and hours of changing and slogging away at the drawings and text.
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    NEDBANK CAPITAL RESEARCH Tel+27 (0)11 295 8218 | Fax +27 (0)11 294 8218 7th Floor | Block F | 135 Rivonia Road | Sandown | 2196 P O Box 1144 | Johannesburg | 2000 www.nedbankcapitalresearch.co.za About this report This report is printed on Sappi Triple Green – a paper grade manufactured according to three environmental pillars: a minimum of 60% of the pulp used in production of this paper is sugar cane fibre, which is the material remaining after raw sugar has been extracted from sugar cane; the bleaching process is elemental chlorine-free; and the remaining pulp used in the production process comprises wood fibre which is obtained from sustainable and internationally certified afforestation, using independently audited chains of custody.